Financial Daily from THE HINDU group of publications
Sunday, Apr 20, 2003
Financial Daily from THE HINDU group of publications Sunday, Apr 20, 2003 |
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Investment World
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Life Insurance Money & Banking - Life Insurance Industry & Economy - Investments Max New York Life's Child endowment plan Nath Balakrishnan
A NEW BORN is no doubt a bundle of joy, but it also brings with it a load of responsibilities. With escalating costs — especially education — it is imperative to invest in a plan that provides a lumpsum when the child is ready to enter college or is going to marry. Insurance companies have floated child plans that address this need. We will examine Max New York Life's child endowment plan this week.
How the plan works
The children's endowment plan has two variants — one which entails premium payment till the child becomes 18, and the other that entails payments till 24. On maturity (either at age 18 or 24, depending on the plan chosen), an amount equivalent to the sum assured plus the accrued bonuses (non-guaranteed and a function of the company's investment performance) is paid. The bonus can be taken through one of the following options:
Riders
The payor benefit rider can be appended, and it enables the policy to remain in currency even if the proposer (the parent) dies/ is disabled during the premium paying term. Additionally, payments of future premiums are also waived.
Death benefit
Should the child die before the policy matures, the company will return all the premiums paid with interest (determined by the company), along with the accrued bonuses, if any. Should the proposer die during the plan term, the policy can continue with or without waiver of premiums, depending on whether the payor benefit rider has been taken or not.
Surrender value and loans
The policy acquires a surrender value after three years' premiums have been paid, after which a loan can be taken. The company will decide the amount and the interest rate applicable on it.
Suitability
Such plans allow parents to address the financial requirements that coincide with milestones in the child's career. It is also advisable to enter this plan early, as one will get the twin benefit of a lower premium payout and compounding.
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