Product Crack | Child unit-linked insurance plan (Ulip)

Product Crack | Child unit-linked insurance plan (Ulip)

Name of The Product

Aegon Religare Rising Star Plan

What is it?

It is a Ulip that is tailor-made for investments for your child.

What do i get?

On maturity, the policy will give the fund value. On death the child gets the death benefit immediately-the higher of the sum assured or 105% of the premium. Subsequently, every year the child gets a sum equal to one annual premium till the end of the term and on maturity gets the fund value.

What’s special?

Apart from the choice of funds that range between pure debt and pure equity options, it offers investment strategy choices. Its investment protect option shifts your investments from pure equity to debt-heavy funds in the last three years of your policy term and the auto-rebalancing option ensures you maintain your asset allocation as it rebalances your money between debt and equity in the proportion of your choice. If you take the auto rebalancing option while buying the policy, there is no cost; but if you opt out or opt for it at a later date, you will have to bear 200.

What are the costs?

The policy allocation charge, which hacks a part of your premium before any money is invested, is applicable throughout the term. It is 4.40% in the first year and tapers down to 1% from the 11th year. Policy administration charge is 60 per month, increasing by 3% every year. The fund management charge ranges from 1% for a pure debt fund to 1.35% for an equity fund. The mortality charge usually depends on the age of the policyholder and the sum assured. But in this plan you pay for something else too. Since the plan waives all future premiums and gives the beneficiary an annual income, that charge is also included in the mortality charge of this plan.

Watch out for

Since the plan offers dual benefit of annual income and waiver of premium on death of the policyholder, it is slightly expensive than its peers that only offer the latter. For instance, a 35-year-old paying a premium of 1 lakh for 22 years for a sum assured of 15 lakh will make a net return of 7.58% in this policy, assuming the fund value compounds at 10% per annum. A cost-effective Ulip will give you at least 8.5%. Reduce the term to 10 years and increase the age to 45 years and the plan will return just 5.79%.

Mint Money take

The extra benefit that the plan offers comes at a cost. But if you like its features, invest early on, preferably when your child is less than six years of age. Since it is a front-loaded policy, you need a long-term horizon for the plan to work for you.