Life insurance corporation of India has at present two plans designed for children and both these policies are meant for providing for future expenses of the child for education, marriage or for any another important event in the life of the child involving finances.
LIC child plans are:
- LIC New Children’s Money Back Plan
- LIC Jeevan Tarun Plan
Who Can Buy LIC Child Policy?
Both LIC New Children’s Money Back Plan and LIC Jeevan Tarun Plan can be taken for a child by Either his/her parents or grandparents. The parents become proposer under these plans and child is the life assured.
What’s Special About a Child Plan?
The unique selling proposition of child plans are that there is a premium waiver benefit under these plans which provides for continuity of the plan even in the event of unfortunate death of the proposer (parent /grandparent).
This means that the policy continues with all the benefits provided under it to the child in the event of death of the proposer and payment of all premium due after the date of death of proposer are waived. This benefit is very important as in cases of children plans the proposer (parent or grandparent) is the financier of the policy and policy continuity is very important for its benefit under the policy to accrue to the child.
In simple words this means that in the unfortunate event of death of the parent/ grandparent who has brought the plan for the child, the plan will still continue as before. All the benefits that the child was to receive under the plan will be paid to the child from time to time as applicable. The death of the proposer (parent/ grandparent) will not impact the child financially.
This makes Child plans excellent investment option to secure your child’s financial future, even in the unfortunate event of your death.
Now let’s look at each plan in detail:
LIC New Children’s Money back plan (UIN 512N296V01)
- This plan is a unique plan meant for the children’s education, marriage or other needs which is provided through survival benefits paid from time to time during the term of the policy.
- In addition, it provides risk cover on the life of the child.
- The plan is for the child aged 0 to 12 years and can be purchased by any of the parent or grandparent of the child.
- LIC’s New Children’s Money Back Plan is a participating non-linked plan meaning thereby that it is eligible for bonuses declared by LIC every year and the investment made in this policy is not invested in stock markets thereby the investments are not linked to profit or losses linked to stock markets.
Benefits under the LIC New Children’s Money back policy:
- Death Benefit: On the death of life assured(Child) Sum Assured plus accrued bonus plus final additional bonus will be paid to the nominee. The death benefit shall not be less than 105% of the total premium paid as on the date of death.
- Survival Benefit: on the life assured(child) surviving, following completion of 18 years, 20 years and 22 years of age, 20% of the sum assured shall be payable that is a total 60% of sum assured will be paid on attaining each of the above-mentioned ages.
- Maturity Benefit: Maturity benefit will be paid on life assured surviving on the date of maturity of the policy. It will be 60% of the sum assured along with accrued bonus and final additional bonus.
Optional benefits under LIC New Children’s Money back plan:
- Option to defer survival benefits: If the policy holder wants to defer the payment of survival benefits under the policy he can opt for the same but has to intimate LIC six months before the due date of survival benefit. In such an event, the survival benefit to be paid later will be increased by interest component added.
- Premium waiver benefit: Premium waiver benefit can be had by paying a nominal additional premium. This benefit is available on the life of proposer (parent/grand-parent). In case of death of the proposer, future premium due under the policy after the date of death of the proposer will be waived and all the benefits under the policy will continue, deeming all the future premium as paid. This is a very crucial benefit and is highly recommended to be taken by the policy holder to ensure that the purpose of taking policy (financial provision for the child) is not thwarted by the unfortunate death of the proposer (parent/grandparent)
Minimum Sum Assured under LIC New Children’s Money back plan:
- Minimum Sum assured under this plan is 1 lakh and there is no maximum limit and it is issued to children aged between 0 to 12 years. Policy term is 25 minus age at entry.
- Risk commences under the plan one day before the policy anniversary coinciding with or immediately following the completion of 8 years of age whichever is earlier. For those aged 8 years and above risk will commence immediately.
Mode and High Sum assured rebates under LIC New Children’s Money back plan:
- A rebate of 2% will be given if policy holder opts for yearly mode of payment of premium and a rebate of 1% will be given for half yearly mode of payment.
- Similarly, a rebate of Rs.2/- per thousand sum assured will be given for sum assured of Rs.2 lacs and above and a rebate of Rs.3/- per thousand will be given for sum assured of Rs.5 lakhs and above.
Loan Facility offered under LIC New Children’s Money back plan:
Loan facility can be availed by the policy holder on the policy acquiring surrender value, that it when three annual premiums are paid.
Tax benefits under LIC New Children’s Money back plan:
- Premium Paid: Tax benefit on premiums paid is available under section 80(c) of income tax act.
- Death, survival and maturity benefit: for these benefits exemptions are available under section 10(10) D of income tax act.
Free Look Period offered for LIC New Children’s Money back plan:
In the event of the policy holder finding any of the policy condition not according to what was explained by the agent or company representative or he finds certain conditions not suited to him he can return the policy within 15 days of its receipt to the office of the company.
LIC Jeevan Tarun Plan (TABLE-834)
LIC Jeevan Tarun policy is a children plan designed to provide for financial needs of the child for education, marriage or other financial needs that are anticipated when he grows up.
- This plan can be purchased by parent or grandparent of the child, who become the proposer under the policy and the child becomes the Life Assured.
- It is a participating non-linked plan meaning thereby that it is eligible for bonus declared by LIC every year and the amount invested are not further deployed by LIC in stock markets.
- Minimum sum assured under the plan is Rs.75000/- and Maturity age is 25 years. Policy term is 25 Years minus age at entry. For instance, for a child of 10 years the policy term will be 25-10=15 years.
Rebates for High sum assured and mode of payment under LIC Jeevan Tarun policy:
- For sum assured of Rs.2,00000 and up to Rs.4,90000/- Rs.2/- per thousand sum assured and for sum assured 5,00000 and above Rs.3/- per thousand sum assured rebate is available.
- For yearly mode of payment of premium 2% and for half yearly mode 1% rebate is available.
Risk coverage age under LIC Jeevan Tarun policy:
When a child is below 8 years, risk coverage starts after 2 years of the policy purchase or 8 years whichever is earlier.
Benefits under the LIC Jeevan Tarun Plan:
- Death benefits:
- If death of life assured occurs before the starting of the risk all premiums paid will be refunded to the nominee.
- If death occurs after the starting of the risk 125% of sum assured plus accrued bonus and final additional bonus will be paid.
- Maturity benefit: There are four maturity options available which can be adjusted to suit the future needs of the child from his present age.
- Option 1: Full sum assured plus bonus payable at 25 years of age.
- Option 2. 5% of sum assured as survival benefit from 20 to 24 years. 75% of sum assured at maturity of the policy.
- Option 3: 10% of sum assured as survival benefit from 20 to 24 years. 50% of sum assured at 25 years.
- Option 4: 15% of the sum assured as survival benefit from 20 to 24 years. 25% of sum assured at 25years.
- Premium Waiver benefit: Is an important benefit available under this plan which provides for waiver of future premiums in case of death of the proposer (parent/grandparent). This benefit is strongly recommended and should be taken by the proposer to ensure that the policy continues even in case of unfortunate death of the proposer(parent) who is actually the financer of the policy. Without this benefit the policy can lapse if the provision to make payment of premium is not made by any other family member of the child’s family, in the event of proposer’s death. Therefore, taking of premium waiver benefit at the time of taking policy by paying nominal additional premium is recommended.
Loan facility under LIC Jeevan Tarun policy:
Loan is available under this plan after 2 years of commencement for a policy with 10 years term and after 3 years of commencement for a policy with more than 10 years term.
Tax benefits under LIC Jeevan Tarun policy:
- Premiums paid: Premiums paid under this plan is eligible for exemption under section 80 (c)
- Death and Maturity Benefits: Death and Maturity benefits are eligible for exemption under section 10(10) D of income tax act.
What happens if LIC Jeevan Tarun Policy Lapse:
If premiums are not paid within the grace period of 30 days from the due date of paying the premium the policy lapses and benefits are either not given or are curtailed. Therefore timely payment of premiums is important.
Free look clause under LIC Jeevan Tarun policy:
Once premium is paid the policy will be received in about 15 days. The policy holder can exercise his right to return the policy under this clause, if he is not satisfied by any of the terms and conditions of the policy. This option is available up to 15 days of the receipt of the policy by the policy holder.
The above two plans are only plans sold by LIC presently as other children plans are withdrawn. The above two plans are largely identical as both are participative non-linked plans.
There are however some differences as in Jeevan Tarun plan the four options available gives the policy holder more choices to calibrate the benefits he wants to receive for the benefit of the child when he grows into a young adult. He can receive either all benefits on maturity or can opt for other options which provide survival benefits up to five years before maturity. In view of the above Jeevan Tarun policy is more flexible.
However, the LIC New children’s Money back plan is tailor made to give survival benefits at the age of 18, 20 and 22 years @ 20% of sum assured for each ages and rest 40% on maturity which may also be preferred by many who want returns spread in seven years before policy matures.