Remember your daadi [granny] saying: “Hamare zamane main cinema kee ticket 1 rupaye main miltee thee ”

This is precisely the theme of what we are discussing here. How do we all plan for our kid ’s future. Are the expenses for higher education going to keep rising, like it has risen in the last 10 years? How do we beat it?

Forget going abroad, the cost of admission to get an MBBS degree has skyrocketed 25 times in the last 10 years.

Are we investing in funds/plans which will beat this rising cost and give a size-able corpus for us to be able to have the kid study abroad, like your close friend’s or neighbors will?

Intelligent Investing in Balanced Equity linked funds is the only answer to beat and match the costs then. History supports the fact that LONG TERM investing in equity for more than 10 years definitely beats returns of any other investment avenue.

We have short-listed the Top Selling 4 Kids Plans, these are Smart kid (by ICICI), Unit Linked Young Star Plus (by HDFC), Child Dream Plan (by BIRLA), Headstart Future Protect (by Kotak)

Benefits

* These policies provide Death Benefit except HDFC which provides 2 options – option (1) Death Benefit option (2) Critical illness benefit.

* In the unfortunate event of death of parent (Life assured), in ICICI, Birla and HDFC the plan will make a lump sum payment of Sum Assured to the nominee and the policy will continue, with the insurance company contributing future premiums till maturity.

* On Death, In Kotak, the company will pay the sum assured plus the unpaid premiums to the customer. This is a negative, as the main purpose of the plan is defeated when the entire fund is released on an uncertain date.

Costs (Load on Premium)

Coming to the charges of each fund, Birla has the lowest allocation charges, but the very high policy administration charges compensate for the same.

* On a fair basis ICICI Smart Kid has the lowest allocation charges of 20% in the first year compared to the other products being reviewed. HDFC ’s charges are the most obscene at 60% of the first year premium, which is a sure negative for most of us.

* If the allocation charges are simply added for a 10 year period, the following would be the total charges:

ICICI PRU LIFE : 48 %

HDFC STANDARD LIFE : 69 %

Birla SUN LIFE : No charges

Kotak OM LIFE : 49 %

Premium Allocation Charges means company is going to deduct some portion from your premium every year. This helps the company pay commission to the agents and also takes care of overheads. A higher allocation charge provides a higher commission to your agent/broker, so beware if your broker is being very forceful on a certain product.

Allocation charges explained

Premium Allocation charge is 30% for the 1st yr & 2% for the 2nd yr & onwards. If your prem. Is 50000, then only 35000 less other charges will be allocating as your fund value in the 1st yr. & so on as per 2nd yrs & onward charges)

* ICICI PRU : 48 % (approx. in 10 yrs.)

* HDFC STANDARD : 69 % (approx. in 10 yrs.)

* Birla SUN : No charges shown.

* Kotak OM : 49 % (approx. in 10 yrs.)

Administration charge

Administration charges are moderate in all companies except in Birla, the brochure is quite confusing. So can’t comment much, but mostly seems to be a via media to collect allocation charges.

CONCLUSION

From our scrutiny we would recommend ICICI ’s Smart Kid as a cost effective and efficient investment for your kiddo. We liked the transparent brochure and comparatively fair and lower charges in the plan. Three Cheers for transparency.

To understand the nuances of different types of policies and its price, feel free to seek the help of InsuranceMall to select the right products based on your need. Or you can directly call them on +91-22-30503050

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