Planning a secure financial future for your child is essential so that your child has the necessary means to pursue his/her dreams. That is why you should create a financial corpus for your child’s future. However, in case of premature death, you might not be able to create the desired financial corpus for your child’s future. This is where child insurance plans come into the picture. These plans ensure that a financial corpus is created whether or not the parent is alive. LIC’s New Children’s Money Back Plan is one such child insurance plan which helps in securing your child’s financial future. Let’s understand the plan in details –
Overview of LIC’s New Children’s Money Back Plan
LIC’s New Children’s Money Back Plan is a traditional money back policy which participates in the profits declared by the insurance company. The plan pays money back benefits at important ages of the child ensuring that the child gets the finances needed for pursuing higher education or marriage.
Key features of LIC’s New Children’s Money Back Plan
- Since the plan participates in the company’s profits, it earns simple reversionary bonuses throughout the policy tenure
- A final additional bonus might also be added to the plan’s benefits on maturity or death
- The child’s life is insured under the policy and a child’s parent or grandparent can buy the plan and become the policyholder
- There is an optional rider under the plan which can be added to the coverage by paying an additional premium
- You can choose to postpone receiving the survival benefit in which case the benefit payable would be increased
- Money-back benefits are paid at ages when the child needs financial assistance the most
Benefits payable under LIC’s New Children’s Money Back Plan
Here are the benefits which are promised under LIC’s New Children’s Money Back Plan –
- Survival benefits
Since this is a money-back policy, survival benefits are paid over the duration of the plan. The benefits are paid when the child attains 18 years, 20 years and 22 years of age. The benefits are paid @ 20% of the sum assured.
- Maturity benefit
When the term of the plan comes to an end 40% of the sum assured, accrued reversionary bonuses and a final additional bonus is paid to the policyholder.
- Death benefit
If the child dies during the term of the policy, a death benefit is paid. The benefit would depend on the age at which the child dies. If the child dies before risk coverage has started under the plan, the premiums paid would be refunded as the death benefit. However, if the risk cover has started and the child dies thereafter, a sum assured on death would be paid along with accrued reversionary bonuses and a final additional bonus. The sum assured on death would be considered to be the highest of the following –
- 10 times the annual premium
- 105% of total premiums paid on death
- The absolute assured amount payable on death which is the basic sum assured
- Premium discounts
The plan allows two types of premium discounts which help you in saving your money. The first discount is called the modal discount which is allowed if you pay the premiums annually or half-yearly. The discount is 2% of the tabular premium if you pay yearly premiums and 1% if you pay half-yearly premiums. The second discount is allowed for choosing a sum assured level which is INR 2 lakhs or above. The discount offered is as follows –
|Sum assured chosen||Premium discount allowed|
|INR 2 lakhs to INR 4.9 lakhs||INR 2 per INR 1000 sum assured|
|INR 5 lakhs and above||INR 3 per INR 1000 sum assured|
- Deferment of survival benefits
You can choose to delay receiving the survival benefit. The delay is allowed if the benefits are received within the policy duration itself. If you delay receiving the survival benefits, the benefit payable would increase by a factor which is determined by LIC.
- Paid-up value
If you have paid the premiums of the first three policy years and subsequent premiums are not paid, the policy becomes paid-up. In a paid-up policy, the benefits payable would reduce. They would become as follows –
- Death Benefit = Death paid-up sum assured = [(number of premiums paid/total number of premiums payable) * sum assured on death] + bonuses vested till date
- Maturity benefit = maturity paid-up sum assured = [(number of premiums paid/total number of premiums payable) * sum assured on maturity] + bonuses vested till date
- The survival benefits are not paid in a paid-up policy. However, if the survival benefits have been deferred, they would be paid after being reduced by the number of premiums paid against the total number of premiums payable.
- Surrender value
If the premiums have been paid for the first three policy years, you can choose to exit the policy by surrendering it. When the policy is surrendered, the company would pay a surrender value which is calculated as follows –
Surrender value = (Guaranteed surrender value factor * total premiums paid till death) + (Guaranteed surrender value factor for bonus * vested bonus)
However, LIC might also declare a special surrender value and if that value is higher than the guaranteed surrender value calculated above, the special surrender value would be paid.
A policy loan is available if you are in need of funds. Loans are allowed only after the plan acquires a surrender value. The value of loan would depend on the surrender value of your policy and you can avail a part of the surrender value as loan. The percentage of surrender value which you can take as the loan would depend on LIC.
Rider benefits under LIC’s New Children’s Money Back Plan
The plan offers LIC’s Premium Waiver Benefit Rider. You can choose the rider for additional coverage. The rider can be taken on the life of the proposer (parent or grandparent of the child). If the proposer dies during the term of the policy, the premiums payable under the plan would be waived. LIC would contribute the premium and the policy would run unaffected. Thereafter, any survival benefits, death benefit or maturity benefit which falls due would be paid as promised.
Eligibility parameters of LIC’s New Children’s Money Back Plan
Coverage under LIC’s New Children’s Money Back Plan is available for children and only parents or grandparents of children can buy the policy. Other eligibility conditions are as follows –
|Entry age||0 years to 12 years|
|Maximum maturity age||25 years|
|Term of the plan||25- entry age of the child|
|Sum assured||Minimum – INR 1 lakh|
Maximum – no limit
|Premium||Depends on age, term and sum assured chosen|
If the child is aged below 8 years when the policy is bought, risk coverage would start at either of the following policy anniversaries, whichever is earlier –
- One day before the policy anniversary after the child attains 8 years
- One day before the policy anniversary when two years of the policy are completed
When the child completes 18 years of age, on the following policy anniversary, the policy would vest in the name of the child. This means that the child would become the policyholder since he/she has attained maturity.
Premium payment under LIC’s New Children’s Money Back Plan
The policy allows you to pay premiums annually, quarterly, half-yearly or monthly. You can also buy the policy and pay premiums through a Salary Saving Scheme. If you do not pay the premium within the due date, you would get a grace period for paying the outstanding premiums. The grace period would be 15 days for monthly premiums and 30 days for all other modes of premium payments.
Here are sample annual premiums (rounded off to the nearest rupee) which are payable at different levels of sum assured and age. The premiums do not include the applicable GST.
|Age of the child||Sum Assured INR 2 lakhs||Sum Assured INR 5 lakhs||Sum Assured INR 10 lakhs|
|5 years||INR 10,780||INR 26,460||INR 52,920|
|10 years||INR 15,406||INR 38,024||INR 76,048|
|12 years||INR 18,012||INR 44,541||INR 89,082|
How does LIC’s New Children’s Money Back Plan work?
To understand the working of LIC’s New Children’s Money Back Plan, let’s take an example. Suppose a parent buys this policy for his child aged 5 years for a sum assured of INR 5 lakhs. The premium payable would be INR 26,460 (excluding taxes) (as per the above-calculated rates). Here’s how the plan would work –
- The policy duration would be 20 years since the child is 5 years old and coverage is available up to 25 years
- If the child does not die
- When the child attains 18 years of age, i.e. after 13 years of policy duration, 20% of the sum assured would be paid as the first money-back benefit. Thus, the parent would receive INR 1 lakh as survival benefit. This money can be used to fund the higher education of the child
- When the child attains 20 years of age, another 20% of the sum assured, which is INR 1 lakh, would be paid
- On the policy anniversary following the child’s 22nd birthday, INR 1 lakh would be paid as the third survival benefit
- When the plan matures, INR 2 lakhs would be paid as the remaining sum assured along with bonuses vested under the plan
- If the child dies
- Risk cover would start from the second policy anniversary. If the child dies before that, the premiums paid would be refunded
- However, if the child dies after the second policy anniversary, the full sum assured of INR 5 lakhs and vested bonuses would be paid
Tax benefits of LIC’s New Children’s Money Back Plan
LIC’s New Children’s Money Back Plan offers you dual tax benefits which are as follows –
- Tax benefit under Section 80C
The premium that you pay for the policy would be allowed as a tax-free deduction under Section 80C. This deduction would help in reducing your taxable liability and save your taxes. You can claim a maximum deduction of INR 1.5 lakhs under this section.
- Tax benefit under Section 10 (10D)
The survival benefits received as well as the maturity or death benefits received under the plan are all tax-free incomes. You don’t have to pay any tax on the benefit received from the plan. The entire benefit is considered to be a tax-free income under Section 10(10D) of the Income Tax Act, 1961.
How to buy LIC’s New Children’s Money Back Plan?
You can buy a policy from an agent of LIC by fixing up a meeting with him/her. You can also visit the nearest LIC branch and apply for LIC’s New Children’s Money Back Plan from the office of the company.
Alternatively, you can buy any other child insurance plan online without any hassle through Turtlemint.. You can visit https://www.turtlemint.com/life-insurance and choose ‘Savings for Child’ as your insurance need to view the available child insurance plans. You would then have to provide your coverage details like –
- Annual income
- Smoking history
- Age of the child
- Investment horizon
- Investment amount
You can also provide your name and contact details for allowing Turtlemint’s executives to get in touch with you to ease your purchase. After the details are entered, Turtlemint shows you a list of child insurance plans offered by different companies. You can compare the plans and buy one online by paying the premiums through Turtlemint’s website.
Documents required for buying LIC’s New Children’s Money Back Plan
To buy the policy, you would have to submit the below-mentioned documents –
- Identity proof of the child and the parent/grandparent proposing insurance
- Age proof of the child and the proposer
- Address proof of the parent
- Photographs of the child and the proposer
- Income proof of the parent
- Proposal form, filled and signed by the proposer
Claim process of LIC’s New Children’s Money Back Plan
To make a survival claim or maturity claim, you would have to submit a claim discharge form which should be filled and signed. The bank account details of the policyholder would also be required so that the claim is directly transferred to the claimant’s bank account.
For death claims, you should inform the company about the death of the child. The claim form number 3783 should be filled and submitted to the insurance company along with the following documents –
- Death certificate of the child
- Police FIR, panchnama, inquest report, post mortem report, etc. in case of accidental death
- Medical reports in case of death due to illness
- Any other documents as required by LIC
The company would then verify the documents and process the claim. The bank details of the nominee should also be provided so that the claim is paid directly to the nominee’s bank account.
Existing customers of Turtlemint can also make their claims through Turtlemint itself. Turtlemint offers its customers dedicated claims handling team which follows the claim process and gets customer claims settled quickly. You would have to inform Turtlemint at 1800 266 0101 or at firstname.lastname@example.org for your claims to be processed and settled.
Bonus depends on the performance of the insurance company in a financial year. They are paid only when the company earns a profit. As such, bonuses are not guaranteed.
If you want to postpone receiving the survival benefit, you should make a request to LIC for at least 6 months before the survival benefits are due to start.
Yes, the plan does not cover suicides. If the insured is more than 8 years old and commits suicide within 12 months of buying the policy, 80% of the premiums paid would be refunded. Similarly, if the child dies due to suicide within 12 months of policy revival, higher of 80% of the premiums paid or the surrender value acquired by the plan would be refunded. No death benefit would be paid under these situations.
Yes, you are allowed a period of 2 years from the date of lapse of the policy to revive it.