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Product crack: Future Generali Assured Education Plan

This is a traditional child insurance plan that guarantees investment benefit upfront

This is a traditional child insurance plan that guarantees investment benefit upfront. Such plans are called non-participating plans.

HOW DOES IT WORK

The policy term in this plan is 17 minus the age of your child. The rationale is to sync the maturity payment with the time the child finishes school in order to fund higher education. So, if your child is a year old, the policy term automatically becomes 16 years. The minimum term allowed is seven years, which means the latest you can buy this plan is when your child is 10 years old. The maximum policy term is 17 years. Depending on factors like your age, the money that you want accumulated on maturity, also called the sum assured, and the pay-out option that you choose, the policy will calculate a premium that you pay every year during the policy term. There are three maturity payment options to choose from. You could choose a lump sum payout (in which the entire sum assured is paid upfront), or you could choose among two part-payment options over four years.

In the first, you get 40% of the sum assured right at the end of the policy term on maturity, 30% in the second year, 20% in the third year, and 10% in the fourth year. In the second, you get 10% of the sum assured on maturity for the first three years and balance 70% in the fourth year.

In terms of insurance, on death of policyholder, the beneficiary or the child will get the death sum assured and the insurer will waive off all future premiums and pay on behalf of the policyholder. The policy will also pay 5% of the sum assured immediately and on every death anniversary till the child turns 17. The death sum assured under this policy is higher of the following benefits: 10 times the annual premium or 105% of the total premiums paid till date or the sum assured.

WHAT DO YOU GET?

According to the illustration in the policy brochure, say, a 30-year-old man buys it for a year-old child, the policy term will be 16 years. For a sum assured or maturity benefit of 20 lakh, the policyholder will have to pay 84,660 for a lump sum payout option of 20 lakh at the end of 16 years. This is a net return of 4% and according to the insurer, return in this policy is 4-5%.

MINT MONEY TAKE

We like child plans because they are designed to make sure that the maturity benefits or targeted goals are not disrupted by death of the policyholder. In this policy, the insurer will also pay 5% of the sum assured every year during the policy term, which is a big plus as it gives some income help to the beneficiary.

But in terms of investment, this plan suffers from the same pitfall of a guaranteed return that other insurers offer. The returns are guaranteed but may be sub-optimal. If you are not looking for this, you could instead buy a term plan that gives periodic payment and invest in a fixed income instrument such as Public Provident Fund.

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