<\/span><\/span><\/span><\/span><\/p>","protected":false},"excerpt":{"rendered":" Publication: DNA, Mumbai;\u00a0\u00a0 Date:\u00a014 June, 2007;\u00a0\u00a0\u00a0 Section:\u00a0Personal Finance;\u00a0\u00a0 Page: 6 Attactive as LICs Komal Jeevan may appear, it gives you neither cover nor returns Insurance in India is synonymous with the Life Insurance Corporation of India and vice versa. For a long time, LIC was the only life insurance institution and the only products available […]<\/p>\n <\/span><\/span><\/span><\/span><\/p>","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[7,5],"tags":[],"class_list":["post-409","post","type-post","status-publish","format-standard","hentry","category-case-study","category-life-insurance"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p2k6Pa-6B","jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/posts\/409","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/comments?post=409"}],"version-history":[{"count":2,"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/posts\/409\/revisions"}],"predecessor-version":[{"id":898,"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/posts\/409\/revisions\/898"}],"wp:attachment":[{"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/media?parent=409"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/categories?post=409"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myfinad.com\/blog\/wp-json\/wp\/v2\/tags?post=409"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"http:\/\/myfinad.com\/blog\/wp-content\/uploads\/2011\/07\/14-june-07-pic-1.jpg\" "\\"14")
<\/a>Insurance in India is synonymous with the Life Insurance Corporation of India and vice versa. For a long time, LIC was the only life insurance institution and the only products available were investment-oriented. Till the entry of private players, it did not even have a term product – one major reason why term plans arent very popular in the country, yet.
\nThe popular plans include endowment, money back, whole life, pension, special and childrens plans. These are available in various flavours, but most of them are a combination of endowment and money back. Komal Jeevan, a childrens plan, is one such popular scheme. The sales pitch for Komal Jeevan includes:
\nIt is a guaranteed product with a bonus of Rs 75 per 1,000 sum assured per year.
\nIt can be utilised for your childs education and marriage and you wouldnt have to worry about your child should something happen to you.
\nThe returns are amazing and the highest in the industry. No one guarantees you a bonus of Rs 75.
\n![\"\"](\"http:\/\/myfinad.com\/blog\/wp-content\/uploads\/2011\/07\/14-june-07-pic-2.jpg\" "\\"14")
<\/a>One of my readers had bought this plan for his son a few years back, falling for these claims. What he did not realise was that this plan essentially covered the life of his son and not his. In order to ensure that subsequent premiums didnt need to be paid on his sons policy in the event of his death, he would have to pay an additional premium.
\nWhats really on offer?
\nAs per the LIC website, \u201cThis is a childrens money back plan that provides financial protection against death during the term of plan with periodic payments on survival at specified durations. This plan can be purchased by any of the parent or grandparent for a child aged 0-10 years.\u201d
\nMark the wording \u201cfinancial protection against death.\u201d One would assume that the policy covers his life. But, no; as the reader discovered, it is the childs life that the policy covers and one has to buy the premium waiver benefit (PWB) along with it.
\nRisk cover: The risk commences either 2 years from the date of commencement of the policy or from the policy anniversary immediately following the completion of 7 years of age of the child, whichever is later. This means, if you buy this policy for a child whose date of birth is March 12, 2003 (4-yrs-old), then his risk cover will start after 2 years or after he completes 7 years, whichever is later. In this case, the risk cover will start in 2010 for a sum assured.
\nDeath benefit: In case of the life assureds death before the commencement of risk (say before 2010), the policy shall stand cancelled and premiums paid (excluding the premium for PWB) under the policy will be refunded (i.e., the parent will receive only the premiums paid). However, if death occurs after the commencement of risk but before the policy matures, the full sum assured plus guaranteed additions, together with loyalty additions, if any, is payable.
\nLoyalty additions: Along with the guaranteed bonus, this plan also gets a share of the profits in the form of loyalty additions, which are terminal bonuses payable along with death or maturity benefits. Loyalty addition may be payable depending on the experience of the corporation.
\nSurvival benefit: A percentage of the sum assured is paid on survival to the end of specified durations (see table: Survival pangs).
\nLets consider an eg (see table). For a sum assured of Rs 10 lakh for a 4-year-old, the premium is Rs 93,521 p.a. without the PWB and Rs 96,087 with PWB. The risk cover in the first year is Rs 96,087 (i.e., the premium paid). The returns work out to around 4.96%.
\nIs it worthwhile?
\nAs one can see,
\nPremiums for this policy are exorbitant
\nLife covered is that of the child and not yours
\nReturns are low despite a guaranteed bonus
\nYou and your child would do well to opt for a sizeable cover for yourself and investing the difference.
\nWhat should you do if you have this policy?
\nThis policy may be surrendered after it has been in force for 3 years or more. The guaranteed surrender value before the date of commencement of risk is 90% of the premiums paid excluding the premiums paid during the first year and any extra premium paid. Thus, in our eg, if you surrender the plan at age 6 after 3 premiums have been paid, you will receive Rs 1.72 lakh (90% of Rs 96,087 + 96,087 – the first years premium). After the date of commencement of risk, at age seven in this case, the guaranteed surrender value is 90% of the premiums paid before the date of commencement of risk excluding the premiums paid during the first year and any extra premium paid plus 30% of the premiums paid after the date of commencement of risk. So, you will receive Rs 1.72 lakh + 30% of Rs 96,087= Rs 2.01 lakh if you close the policy after 4 premiums have been paid. If you have bought this policy in the last couple of years, you can certainly look at surrendering it and instead buying yourself (parent) a sizeable cover.
\nThe writer runs My Financial Avisor and can be reached at amar.pandit@myfinad.com<\/a>
\nTo read the original article click here<\/a><\/p>\n