Name of the child ulip
Bharti AXA Life Bright Stars Edge
What is it?
It is a Ulip that targets at investments for your children.
What do I get?
It is a type II Ulip that gives the beneficiary the sum assured as well as the fund value on death of the policyholder. On maturity, you just get the fund value.
There is nothing special in this policy. A regular child Ulip has two distinctive features. These plans have an in-built waiver of premium rider, which on death of the policyholder waives off all future premiums and the insurer pays those premiums. Hence, the death benefit is staggered in such a manner that the sum assured is paid out immediately to take care of any financial crunch that may crop up then and the fund value is paid on maturity to fund the goal for which the plan was taken.
In this plan both sum assured and fund value are paid immediately. You will have to specially choose a waiver of premium benefit rider in order to enjoy the benefits at extra cost.
What are the costs?
The policy allocation charge, which is deducted from your premium before any investments are made, is applicable only for the first 12 years. It is 8% in the first year and remains a constant 5.50% till the 12th year. The policy administration charge is at 0.18% of the annual premium and is charged from the sixth year. It can go up to a maximum of Rs5,000 in a year. The fund management charge varies from 1% for the debt fund to 1.35% for equity funds. The mortality charge depends on the age of the policyholder and the term chosen.
Watch out for
Even as the policy offers no flexibility, the cost is on the higher side. For instance, if a 35-year-old buys this policy for 20 years, he pays Rs1 lakh for a sum assured of Rs20 lakh. Let’s say he invests in an equity fund of the Ulip. Assuming the fund grows at 10%, the charges eat away 2.87 percentage points over 20 years to give an internal rate of return of 7.13%.
Mint money take
This Ulip does not offer you the benefit of a child plan that staggers the payouts on death. And if you opt for a waiver of premium rider, the returns will come down further. There are cheaper options in the market.