When it comes to children’s education, no parent wants to compromise. Want to make the best investment for children’s education. Want to know about best child plan or best policy for children’s education?
In this connection, today let’s discuss about SBI Life’s Smart Champ Insurance Plan (SBI Life Smart Champ Insurance Plan). Know about this plan and see whether you should invest in this plan.
Some special features of SBI Life Smart Champ Insurance Plan (SBI Life Smart Champ Insurance Plan in English)
- Is a traditional insurance plan.
- There are two premium payment options: Single Premium and Limited Premium
- In Single Premium option you have to pay only once.
- In Limited premium option, you have to pay till the child turns 18 years of age.
- Policy Term (Policies Terms,: Up to the age of 21 years of the child
- the minimum
insurance coverage (minimal Sum Assured): Rs 1 lakh - Maximum insurance coverage (maximum Sum Assured, 1 Ten million Rupees
- Life insurance is on the life of the parent (proposer). Note, never buy such plans, in which insurance is on the life of the child.
- Apart from death, the sum assured is also given in case of total and permanent disability of the parents in an accident.
- Loan facility is also available.
- Rebate is available on higher premium.
ReadTaking life insurance in the name of children is foolish
SBI Life Smart Champ Child Insurance Plan: Maturity Benefit
You have to pay the premium till the child turns 18.
After this, the insurance company gives you money for the next 4 years. This money is given in a total of 4 annual installments. First 3 installments are equal. The amount of the fourth installment can be more.
Let’s say your daughter’s age is 5 years at the time of buying the policy. You will have to pay premium 13 times (18 years – 5 years). The premium paying term is 13 years and the policy term is 16 years. You will get money for four years after the end of premium payment.
In this policy you get Reversionary Bonus. This bonus is announced every year. But the bonus is available only at the time of maturity. Note that no Reversionary Bonus is available in the last 3 years. Also you get terminal bonus in the last year (when your child turns 21). Note that there is no guarantee that how much bonus will be received.
At the end of the policy year in which your child turns 18: 25% of Sum Assured + 25% of Vested Reversionary Bonus
At the end of the policy year in which your child turns 19: 25% of Sum Assured + 25% of Vested Reversionary Bonus
At the end of the policy year in which your child turns 20 : 25% of Sum Assured + 25% of Vested Reversionary Bonus
At the end of the policy year in which your child turns 21 : 25% of Sum Assured + 25% of Vested Reversionary Bonus + terminal bonus
Note, if you want, you can take all the money together after the child turns 18. At that time you can take your future installments at a discount rate of 6.5%.
SBI Life Child Insurance Plan (SBI Life Smart Champ Insurance Plan): Death Benefit
This is also very important.
As long as you are around, you will be investing in one way or the other.
but if something happens to you, Then how will the investment for children’s education continue?
Therefore, this aspect is very important in any child insurance plan or child education plan.
In case of death of the proposer (mother or father) or total permanent disability in an accident during the policy term:
- Your family’s insurance amount will be given.
- All future premiums waived Will go ,premium Waiver,
- Bonuses will continue to be added to your policy even after the premium is waived off.
- Full benefit will be available at the time of maturity. The policy benefit received on the death of the mother or father does not affect the maturity benefit.
Do not underestimate the effect of disability in an accident. Total disability (loss of both hands, loss of both legs or loss of both eyes) can have a huge impact on your earning potential.
According to me the design of the scheme is good. Children’s policy should be like this. In case of death of the proposer, the family gets some lump sum amount. Further premiums are waived off. But this does not affect the investment for children’s education. You keep getting bonuses. After that, the maturity benefit is also available in full.
Now let us see how the returns are available in SBI Smart Champ plan. Let us understand with the help of an example.
Example: SBI Smart Champ Child Plan
You are 35 years old. You invest in this plan for the education of your 6 year old daughter. You choose the Limited Premium option. Sum Assured keeps 5 lakh rupees.
The annual premium will be Rs 41,410. The premium in the first year after GST will be Rs 43,273. From the second year onwards the annual premium will be Rs 42,341.
You have to pay premium for 12 years (18-6). You will get life cover for 15 years (policy term).
Suppose you bought the plan on March 1, 2014. You have to pay 12 annual installments. The last installment will be paid on March 1, 2025. Life insurance will be available till March 1, 2029.
The insurance company will pay on 1 March 2026, 1 March 2027, 1 March 2028 and 1 March 2029.
Note that there is no guarantee of returns in this scheme. The bonus depends on the performance of the insurance company. That’s why it is difficult to say with certainty that how much amount you will get on maturity.
You can see that the sum insured is Rs.5 lakh. So at the end of the policy year of attaining the age of 18 years, at least Rs 1.25 lakh will be received. You will get this much even after completing 19, 20 and 21 years of age. Balance depends on bonus.
In the above image you can see that two equations have been given. First when the insurance company earns 4% return, second when the insurance company earns 8% return. According to me, 8% return is a good return for the kind of investments that will be made in this plan.
In this case what return will you get?
If reversionary bonus of 3% is received, then every year the bonus becomes Rs 15,000 (5 lakh X 3%). The terminal bonus as per illustration is Rs.27,000.
In this case, you will get Rs 1.7 lakh at the end of the policy on completion of 18 years of age. At the end of 19 and 20 years, you will get the same amount. 1.97 lakhs will be available at the age of 21 years.
The return was 4.05% P,a,
This is not a good return for a long term investment.
If you had taken life insurance with the help of term insurance and invested the remaining amount in PPF, you would have got more insurance and better returns.
PPF currently offers an interest rate of 8% p.a. You (35 years old person, 15 years policy) can buy a term insurance plan with life insurance of 50 lakhs and disability cover of 25 lakhs by paying an annual premium of Rs 7,000. If you invest the remaining amount in PPF, then you will be able to deposit much more amount. More insurance and better returns.
what should you do,
The design of this SBI child insurance plan is good, but the returns are very less. Therefore, do not invest in this plan for the education of your children.
It would be better to buy a term insurance plan. Add permanent disability rider to it. Invest in PPF or any other investment product (Mutual Fund, Sukanya Samriddhi, etc.) to invest.
Courtesy: www.personalfinanceplan.in
additional links
SBI Smart Champ Insurance Policy Wordings
SBI Life Smart Champ Insurance Plan: Product Brochure
Complete details of LIC Jeevan Tarun Plan 834
(Visited 4,207 times, 1 visits today)