Secure future for your child

"Emotions run high when parents plan for a child's future. And chances are that one gets swayed by insurance agents' pitches. However, before investing in the future of your child, it will be wise to let one's head, not heart, rule" .

Children's insurance can be broadly divided into two categories:

• Policies that take care of children's education or marriage; and
• Plans that provide for an immediate payment of basic sum assured amount on death of the (parents') life assured during the term of the policy.

Apart from the public sector player Life Insurance Corporation of India, a lot of private players have entered the field. Yet, while buying children's plans, people tend to bank on LIC more than its private counterparts.

Let's take a look what schemes LIC has on offer for children:

1. Jeevan Anurag is a profit plan meant to take care of the educational needs of children. The plan can be taken by a parent on his or her life.

Benefits are payable at pre-specified durations irrespective of whether the life assured survives to the end of the policy term or dies during the term of the policy.

In addition, this plan provides for an immediate payment of basic sum assured amount on death of the life assured during the term of the policy.

Assured benefit

Payment of 20 per cent of the basic sum assured at the start of every year during last three policy years before maturity.

At maturity, 40 per cent of the basic sum assured along with reversionary bonuses declared from time to time on full sum assured for the full term and the terminal bonus, if any shall be payable.

For example, if the term of the policy is 20 years, 20 per cent of the sum assured will be payable at the end of the 17th,18th, 19th year and 40 per cent of the sum assured along with the reversionary bonuses and the terminal bonus, if any, at the end of the 20th year.

Death benefit

Payment of an amount equal to sum assured under the basic plan immediately on the death of the life assured.

2. Another popular LIC policy is: Komal Jeevan

This is a children's money-back plan that provides financial protection against death during the term of the plan with periodic payments on survival at specified durations. This plan can be purchased by the parent or the grandparent for a child aged from 0 to 10 years.

Commencement of risk cover

The risk commences either after two years from the date of commencement of policy or from the policy anniversary immediately following the completion of 7 years of age of child, whichever is later.

Premiums

Premiums are payable yearly, half-yearly, quarterly, monthly or through salary deductions, as opted for, up to the policy anniversary immediately after the life assured (child) attains 18 years of age or till the earlier death of the life assured. Alternatively, the premium may be paid in one lump sum (Single premium).

Guaranteed additions

The policy provides for guaranteed additions at the rate of Rs 75 per 1,000 sum assured for each completed year. The guaranteed additions are payable at the end of the term of the policy or earlier death of the life assured.

Loyalty additions

This is a with-profit plan and participates in the profits of the corporation's life insurance business. It gets a share of the profits in the form of loyalty additions, which are terminal bonuses payable along with death or maturity benefit. Loyalty addition may be payable depending on the experience of the corporation.

3. Another LIC plan is Jeevan Kishore, an Endowment Assurance Plan available for children of less than 12 years. The policy may be purchased by any of the parent/grand parent.

Commencement of risk cover

The risk commences either after two years from the date of commencement of policy or from the policy anniversary immediately following the completion of 7 years of age of child, whichever is later.

Premiums

Premiums are payable yearly, half-yearly, quarterly or monthly throughout the term of the policy or till earlier death of child.

Bonuses

This is a with-profits plan and participates in the profits of the corporation's life insurance business. It gets a share of the profits in the form of bonuses. Simple reversionary bonuses are declared per thousand Sum Assured annually at the end of each financial year.

Once declared, they form part of the guaranteed benefits of the plan. A final (additional) bonus may also be payable provided policy has run for certain minimum period.

How to buy

Coming to the crux of the matter: how to buy these policies. There are four basic ways of purchasing insurance policies. These are:

Buying from individual insurance branches -- Step in to any of the insurance branches and meet the policy purchase/sale desk. For instance, in case you want to buy LIC's Jeevan Kishore plan for your daughter, visit any of the LIC branches across the country to buy it.

Buying from banks -- Most nationalised as well as private banks have tied up with insurance companies and one can buy the policies of their choice from any outlet. For instance, in case you want to invest in ICICI Child Plan, all you need to do is walk into any ICICI Bank branch and ask for the policy form.

Buying through agents -- The most convenient mode of purchasing an insurance policy is buying through agents.

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