Name of the Child Ulip
HDFC Standard Life YoungStar Super Premium.
What is it?
An improvement over HDFC SL YoungStar Super II, this invests in the market and helps you save for your child’s future.
What do you get?
As a policyholder if you survive the term, you will get back the fund value. However, there are two types of death benefits that you need to choose from. The “Save Benefit” option will pay the beneficiary the sum assured immediately on death and will invest all the future premiums on behalf of the policyholder. On maturity the child will get the fund value as maturity corpus. In the “Save-n-Gain Benefit” option, the future premiums are split into two; one portion is invested and the other is paid to the beneficiary.
This plan has relaxed underwriting for individuals who choose low sums assured and small tenors of 10 or 15 years. For annual premiums up to Rs 2 lakh and sum assured that is 10 times the premiums, there may be no medical underwriting if you are a healthy individual. You will only need to fill a questionnaire stating your good health and you need to be between 18 and 50 years of age.
What are the costs?
The costs are the same as YoungStar Super II policy. The premium allocation charge, which is a straight deduction from the premium that you pay, is applicable throughout the term of the policy. In the initial seven years it is 4% and from the eighth year it is at 1%. The policy administration charge is 0.25% per month of the annual premium and will increase by 5% every year. However, it can be a maximum of 0.4% of the annual premiums or Rs 500 per month, whichever is lower. The fund management charge is fixed at 1.35%. However, the mortality charge is more expensive since this is a type-II Ulip that pays both the sum assured and the fund value.
Over a 20-year horizon, assuming a 35-year-old takes a policy for a premium of Rs 1 lakh and sum assured of Rs 15 lakh, the internal rate of return on the policy is 7.21%, assuming the fund grows by 10%.
Mint Money take
What we like about this plan is the flexibility it offers. If you think you child may need periodic help in case you meet with an unfortunate event, you can opt for “Save-n-Gain Benefit”, else opt for “Save Benefit”. But what we don’t like is the cost; some other policies in the market are more cost-effective. But if you decide to buy this, keep in mind that a child Ulip works only in the long term—at least 10 years.