“Mein bhi ek pita hoon, aur mein yeh samajhta hoon”–this line sounds familiar to you? Yes, we are talking about that Aviva advertisement in which Sachin Tendulkar, donning the avatar of a doting father, sends his child off to school and seeks to drive home the need of parents guaranteeing their kids’ future education.
Morale of the story? Buy a children’s plan to secure your child’s future financial requirements, in case you are not there. A pretty valid argument, in many ways, considering the soaring cost of education today across the board–be it primary education in English medium private schools, or higher studies involving Graduation and Masters (e.g. Engineering, M.B.A. and medical sciences).
So, we put Aviva’s flagship child plan–the Young Scholar Advantage policy–through its paces, and have shortlisted the salient features of this scheme for you to consider.
The ‘Young Scholar Advantage’ plan from UK insurance behemoth Aviva is a unit-linked insurance policy, which combines a life insurance cover (thus protecting your family in the event of your unfortunate death) with investment. This ULIP invests the premium–net of applicable charges–into various asset classes such as stocks (equities), debt (bonds) and cash market.
Parents seeking to purchase this regular-premium scheme must be aged between 21 to 50 years, with the entry age for child beneficiaries pegged at 0-17 years.
The Policy Term (PT) can vary anywhere between 10 to 25 years, with the maximum maturity age for the policy owner (parent) set at 70 years.
One has the option of opting for a ‘Premium Payment Term (PPT)’ of either 5 years or equal to the Policy Term. Accordingly, the premium amount is calculated, with annual minimum premium set at Rs. 20,000 if PPT equals PT. But if PPT is 5 years, then the minimum premium figure shoots up to Rs. 1,00,000. On the other hand, there is no cap for maximum premium.
The policy holder is given the flexibility of making premium contributions in various modes, either once per annum, or every six months or even on a monthly basis.
The minimum ‘Sum Assured’ (S.A.) amount is computed as 10 times the annual premium, whichever is higher.
As we mentioned earlier, the ‘Young Scholar Advantage’ plan is an insurance-cum-investment policy. It provides the choice of choosing any one of 8 unit-linked funds–Balanced Fund II, Bond Fund II, Enhancer Fund II, Growth Fund II, Index Fund II, Infrastructure Fund, Protector Fund II and PSU Fund–where a portion of the plan corpus will get invested.
While making up your mind on which fund to select, we would suggest you to take into account your expectations in terms of returns, risk appetite, age, etc. For instance, a young married guy in his late 20s can be rather aggressive as far as investing in stock markets is concerned, whereas someone in his mid-30s to early 40s will be relatively better off not opting for an all-out equities (read, high risk) allocation.
To allocate capital for investments, you have two options, namely a Systematic Transfer Plan and an Automatic Asset Allocation.
Here are some of the standout features of the ‘Young Scholar Advantage’ child plan –
Death Benefit (In case of the demise of the insured individual)
1. Aviva will pay Sum Assured to the deceased’s family
2. The company will also bear the expenses for paying all the subsequent premiums, excluding rider premium into the deceased person’s fund. This makes sure that the corpus the parent had planned for is made available to his child even after his death.
3. The plan will continue to be in force with all the investment benefits intact for the child till maturity.
1. Aviva will allocate “Loyalty Additions” to the selected investment options (funds), provided the insured parents continuously pay all due premiums.
2. At the end of the 11th year of the policy, the Loyalty Addition will be 1.5% of Fund Value with regard to regular premiums. For the following years of the policy term, the additions will be made at the end of every subsequent 2nd policy year till the policy matures.
3. Loyalty Additions will be allocated even after the death of the policy owner.
1. On maturity, the insured person will get the Fund Value with regard to both regular premiums and Top-up premiums, on top of accrued Loyalty Additions, if any as on the maturity date. The beneficiary (read, the child) will be entitled to this Maturity Benefit in the event of the demise of the parent before the end of the policy term.
2. A so-called ‘Settlement option’, which can be opted for at maturity, allows the policyholder to keep the money invested in the fund even after maturity, ensuring that the sponsor gets the same systematically over a period of 1 to 5 years.
Riders – As you might be aware, riders are additional components of an insurance plan that enhance or restrict the benefits which are otherwise payable, thereby offering the policy owner the flexibility to change the scope of the original policy.
The ‘Young Scholar Advantage’ plan comes with the following three riders –
Child Education Rider
Aviva will pay a specific monthly amount, as calculated by the insured parent during inception, throughout the Policy Term to facilitate an uninterrupted education of the child in case of the parent’s demise.
The insurer pays the Sum Assured immediately when the parent suffers from a crippling disability or a pre-specified critical illness. Moreover, Aviva will waive off future premiums, and commit to paying all remaining premiums as a lump-sum amount into the fund. This lets the policy continue unabated, with investment benefits in place.
Term Plus Rider
An ‘Aviva Term Plus Rider’, if chosen by the insured parent while buying the child plan, makes it mandatory for the company to pay an extra fixed amount in case of the parent’s death.
Tax benefits- The policy owner can claim tax benefits under Section 80 C of the Income Tax Act. Plus, Maturity and Death Benefits are exempt from taxes, as per SEC 10 (10)D of the same Act.
Limitations – The ‘Young Scholar Advantage’ plan from Aviva allows complete withdrawal only after 5 policy years.