Do you want to ensure that your child’s aspirations are never compromised?
For that, you should start saving & investing the savings in the right investment product.
ABSLI Child’s Future Assured Plan, a Life Insurance Savings Plan, claims to offer Assured Benefits to take care of the important milestones in your child’s life – Education and Marriage.
But will it suit your Investment Basket? This detailed review helps you in ascertaining the suitability of the plan.
Table of Contents:
1.)What is ABSLI Child’s Future Assured Plan?
2.)Features of the ABSLI Child’s Future Assured Plan
3.)Eligibility Criteria for the ABSLI Child’s Future Assured Plan
4.)Benefits under the ABSLI Child’s Future Assured Plan
- Assured Benefit
- Loyalty Additions
- Maturity Benefit
- Death Benefit
- Enhanced Insurance Cover
5.)A Grace Period, Discontinuance & Revival of the ABSLI Child’s Future Assured Plan
6.)Free Look-Up Period of the ABSLI Child’s Future Assured Plan
7.)Surrendering the ABSLI Child’s Future-Assured Plan
8.)Advantages of the ABSLI Child’s Future Assured Plan
9.)Disadvantages of the ABSLI Child’s Future Assured Plan
11.) IRR Analysis of the ABSLI Child’s Future Assured Plan
12.)ABSLI Child’s Future Assured Plan Vs. Other Investment Instrument
13.)ABSLI Child’s Future Assured Plan Vs. Pure Term Insurance + PPF/ELSS
14.)Final Verdict on the ABSLI Child’s Future Assured Plan
What is ABSLI Child’s Future Assured Plan?
It is a Non-linked, Non – participating, Individual, Life Insurance, Savings Plan.
It offers you Assured Benefits to fund your child’s key milestones.
The remaining premiums will be waived off in the case of an unfortunate event that happened to the policyholder. The key milestones of your child’s future are secured with a guarantee even in your absence.
Features of the ABSLI Child’s Future Assured Plan
- Three plan options include:
- Education Milestone Benefit
- Marriage Milestone Benefit
- Education & Marriage Milestones Benefit
- Flexibility to choose from various Payment terms and Policy Terms.
- Option to enhance your risk cover with appropriate rider options.
- The plan offers complete financial Security through policy continuance benefit.
- Option to avail of Enhanced Insurance Cover (50%/100%/2000% of Sum Assured).
Eligibility Criteria for the ABSLI Child’s Future Assured Plan
Let us look at what criteria you need to meet to be eligible to enter this plan at a glance below;
|Plan Options||Education Milestone Benefit
Marriage Milestone Benefit
Education and Marriage Milestone Benefit
|Life Insured Entry Age||Minimum: 18 Years Maximum: 65 Years;
(50 years if Enhanced Insurance cover is chosen)
|Maximum Maturity Age||75 years|
|Policy Term (PT)||Education Milestone Benefit: 10 to 29 years
Marriage Milestone Benefit: 8 to 32 years
Education and Marriage Milestone Benefit: 11 to 32 years
|Premium Paying Term (PPT)||Minimum:
Education Milestone Benefit/ Marriage Milestone Benefit: 5 years
Education and Marriage Milestone Benefit: 6 years
Maximum: 12 years (For all three Plan options)
|Minimum Annualized Premium||₹ 30,000|
|Minimum Sum Assured||₹ 4,00,000|
|Maximum Sum Assured||No Limit|
|Enhanced insurance Cover (Optional)||50%, 100%, or 200% of the Sum Assured|
|Payment Mode & Modal Loading||Annual – 0%|
|Semi-Annual – 1%|
|Quarterly – 1.5%|
|Monthly – 4%|
|Premium Band||Band 1 – 4,00,000 – 7,99,999|
|Band 2 – 8,00,000 – 11,99,999|
|Band 3 – 12,00,000 +|
Benefits under the ABSLI Child’s Future Assured Plan
ABSLI Child’s Future Assured Plan offers you Assured Benefits to fund your child’s key milestones. You can choose one of the following options at inception to receive Assured Benefits. The chosen assured benefit option cannot be changed during the term of the policy.
Education Milestone Benefit
The pay-outs shall preferably commence on the policy anniversary when the beneficiary Child attains age between 15 years to 21 years. The Assured Benefit will be payable annually at the end of each year over the Education Milestone Benefit Period of 3, 6, or 9 years as opted by you.
|Education Milestone Benefit payable at the end of the year|
Marriage Milestone Benefit
Plan to get funds for your child’s marriage anytime while your child’s age is preferably between 24 to 32 years. This option will give you a guaranteed lump sum payout at the end of the policy term as chosen by you.
Education and Marriage Milestones Benefits
Under this option, both Education Milestone Benefit as well as for Marriage Milestone Benefit can be chosen. The Education Milestone Benefit will be paid as defined above on their respective due dates and the Marriage Milestone Benefit will be paid at the end of the Policy Term. You will also have the choice to receive 100% or 150% or 200% of the Sum Assured as Assured Benefit for Marriage milestones under this option.
Each Assured Benefit will be enhanced by 20% as a Loyalty Addition at the end of the Premium Payment Term, provided you have paid all due instalment premiums.
The Maturity Benefit shall be the amount of the Assured Benefit payable at the end of the Policy Term.
In the event of death of the Life Insured during the Policy Term, Nominee will receive Death Benefit as below:
- Assured Benefits as per the option chosen by you shall be paid on their respective due dates; plus
- Any excess amount of Sum Assured on Death over the discounted value of the Assured Benefits payable in the future will be paid immediately as lump-sum
- All future instalment premiums shall be waived.
Alternatively, the Nominee can also opt for immediate payment of Death Benefit.
Enhanced Insurance Cover
At inception, you can also opt for Enhanced Insurance Cover equal to 50% or 100%, or 200% of the sum assured, by paying an additional premium. If the Enhanced Insurance Cover is opted for, additional Sum Assured as chosen at inception will be paid immediately to the nominee in case of death of the life insured during the policy term.
The Nominee will have the option to choose one of the following:
- Lump sum payment Or
- Staggered payment with fixed annual or monthly income.
A Grace Period, Discontinuance & Revival of the ABSLI Child’s Future Assured Plan
If you are unable to pay your premium by the due date, you will be given a grace period of 30 days and it will be reduced to 15 days if the policyholder had opted for the monthly mode of payment.
If You discontinue paying premiums after all due premiums for at least two full policy years are paid, your Policy will not lapse but continue on a Reduced Paid-Up (RPU) basis.
You can revive your policy for its full coverage within five years from the due date of the first unpaid premium by paying all the outstanding premiums together with interest.
Free Look-Up Period of the ABSLI Child’s Future Assured Plan
If you are not satisfied with the terms & conditions of the ABSLI Child’s Future Assured Policy, you will have the right to return your policy to the corporation within 15 days from the date of receipt of the policy.
Your Free Look-Up Period will be extended up to 30 days if you had brought an electronic policy or through the Distance Marketing Mode.
Surrendering the ABSLI Child’s Future-Assured Plan
Your policy will acquire a surrender value after all due premiums for at least two full policy years are paid.
The surrender value payable will be higher than the Guaranteed Surrender Value or Special Surrender Value.
Advantages of the ABSLI Child’s Future-Assured Plan
- The pay-outs (assured benefits) are guaranteed, so that you can earmark for a particular expense.
- In the event of untimely death, Policy continuance benefit is an in-built option.
- For added protection, you can enhance your insurance coverage by adding Riders.
- Loan up to a maximum of 85% of surrender Value is allowed.
- You will have the flexibility to defer any of the Assured Benefit payments by 1, 2, or 3 years.
Disadvantages of the ABSLI Child’s Future Assured Plan
- There might be misalignment in the assured benefit, pay-out period & your actual requirement.
- Although the benefits are guaranteed, they will not be sufficient to meet the increasing inflation.
- The chosen assured benefit option cannot be changed during the term of the policy.
You can refer to the ABSLI Child’s Future Assured Policy Brochure for further details.
The Assured benefit under the ABSLI Child’s Future Assured Plan is guaranteed (as a % of the Sum Assured). With this cash flow, we can easily calculate the actual return.
The Internal Rate of Return (IRR) helps you to estimate whether you should buy this plan to fulfil the hopes and dreams of your child. This return can also be compared with other investment returns & analyze which option suits you the most.
IRR Analysis of the ABSLI Child’s Future-Assured Plan
Let us assume a 35-year-old male buys the ABSLI Child’s Future Assured Plan for a sum assured of Rs. 5 Lakhs & a policy term of 20 years. The Premium paying term is 8 years & the annualized premium is ₹35,775.
He has chosen the Education milestone – 3 years pay-out period. Let us calculate the IRR for this cash flow.
|Sum Assured||₹ 5 Lakhs|
|Policy Term||20 years|
|Premium Paying Term||8 years|
|Annualized Premium||₹ 35,775|
|Education Milestone||Pay-out period: 3 years|
The assured benefit is paid in the last 3 years i.e., the 18th, 19th & 20th year. Loyalty addition is also added with each assured benefit.
|Age||Year||Annualized Premium/Benefit||Death Benefit|
The IRR for the ABSLI Child’s Future Assured Plan is at 5.16% which is lower than a Bank FD rate of interest. It is also not an inflation-beating return. Especially when you look at education inflation, it hovers around 8 – 10%. In the long run. So, there may be some deficit in the required corpus to fulfil your child’s dream.
ABSLI Child’s Future Assured Plan has no risk associated with it & all the pay-outs are guaranteed. So, it would be appropriate to compare it with other risk-free fixed Instrument Returns.
ABSLI Child’s Future Assured Plan Vs. Other Investment Instrument
You can refer to the following list for other fixed-income securities that generate a better return than the ABSLI Child’s Future Assured Plan.
- Fixed Deposits (FDs) – FDs are offered by banks and post offices in India and typically offer higher interest rates than traditional savings accounts. The potential return on FDs varies depending on the term and the interest rate offered by the bank or post office but generally ranges from 5.5% to 7% per year.
- Public Provident Fund (PPF) – PPF is a government-backed savings scheme that offers tax benefits along with a fixed return. The potential return on PPF is currently 7.1% per year, which is guaranteed by the government.
- National Savings Certificates (NSCs) – NSCs are issued by the Indian government and offer a fixed return. The potential return on NSCs varies depending on the term but currently ranges from 6.8% to 7.6% per year.
- Corporate bonds – Corporate bonds are debt securities issued by companies and offer a fixed return. The potential return on corporate bonds depends on the creditworthiness of the issuer and the term of the bond but generally ranges from 6% to 9% per year.
- Post Office Monthly Income Scheme (POMIS) – POMIS is a savings scheme offered by the Indian post office that provides a fixed monthly income. The potential return on POMIS is currently 6.6% per year.
Even though fixed investment instruments are risk-free, to meet the expenses related to kids, it is advisable to go for equity-related instruments. But keep in mind, only if you have a time horizon of 7 years plus, go for an Equity related Instrument. This will help to beat inflation comfortably. Thereby you can make your child’s dream come true.
Refer to the following cases below – One is a risk-free instrument – PPF & the other one is an equity-related instrument – ELSS.
ABSLI Child’s Future Assured Plan Vs. Pure Term Insurance + PPF/ELSS
We can assume all the metrics like annual premium, sum assured similar to the ABSLI illustration. A Pure Term Life Insurance Policy for a sum Assured of Rs. 5 lakhs would cost you an annual premium of ₹ 7,200. The policy term is 20 years & the premium paying term is for 5 years.
PPF – The Lock-in period is 15 years. But in the previous illustration, the premium paying term is for 8 years only. So, in the initial 5 years after paying a life insurance premium, you will be left with ₹ 28,575.
In the next 2 years ₹ 35,775 could be invested. And in the 8th year amount – adjustments could be made for the next 7 years’ contribution i.e., in the next 7 years a minimum investment of ₹500 is invested & this amount is adjusted in the 8th year contribution.
The final maturity amount from PPF after 15 years is invested in a 7% return instrument & could be utilized for your child’s education expense.
ELSS – In the initial 5 years you will be left with ₹ 28,575 & in the next 3 years you can invest ₹ 35,775 (The premium paying term is 8 years in the above illustration).
After the end of the 8th year, the fund value (post-tax) accumulated through the ELSS fund is invested in a 7% return instrument. Thereby, you can withdraw for your child’s education expenses as & when required.
|Age||Year||Term Insurance + PPF||Death Benefit||Term Insurance + ELSS||Death Benefit|
|54||20||₹ 3,19,680||5,00,000||₹ 9,78,810||5,00,000|
The IRR under the combination of Pure Term Insurance + PPF is 6.02%.
The IRR for the combination of Pure Term Insurance + ELSS scenario is 10.59% which is a Post-Tax Value.
These rates are better than the ABSLI Child’s future Assured Plan. Investing separately for Your Financial goals rather than investing through Insurance cum Investment policies would be a better choice.
Final Verdict on the ABSLI Child’s Future Assured Plan
You can plan to receive funds in the future for your child’s education or their grand wedding through the ABSLI Child’s Future Assured Plan.
It assures you that you receive the benefit for the Financial Goals related to your kids. But this assured benefit will not help you to meet all the Financial Goals related to your kids.
The reason behind this is the skyrocketing education expense & economic inflation. To meet this inflated cost, a well-diversified portfolio must be built.
The only advantage of this plan is that even in the absence of the policyholder, all the future pay-outs are assured and the remaining premiums will be waived off. This feature can be totally replaced by a Pure Term Life Insurance Policy with adequate Life Cover.
At the end of this analysis, it is evident that any ready-made child plan will not help you to secure your child’s dream.
You can always consult with a Professional Financial Advisor to completely customize your Financial Plan according to your Financial Requirements.