ICICI Pru Smart Kid Guarantee Plan: Good or Bad? An Insightful Review

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Is ICICI Pru Smart Kid Guarantee Plan the right choice to secure your child’s future?

Can the ICICI Pru Smart Kid Guarantee Plan provide peace of mind from knowing your child’s future is financially secure?

Is ICICI Pru Smart Kid Guarantee Plan the solution that aligns with your child’s milestones, from education to career aspirations?

In this article, we explore the key features, benefits, and drawbacks of this plan. We’ll also analyse its returns using the Internal Rate of Return (IRR) method to help you make an informed decision.

What is the ICICI Pru Smart Kid Guarantee Plan?

ICICI Pru Smart Kid Guarantee Plan is a guaranteed savings plan for your child’s goals that ensures security with continued benefits and future premiums waived in case of unforeseen events.

ICICI Pru Smart Kid Guarantee Plan comprises ICICI Pru GIFT Pro and ICICI Pru Non-Linked Waiver of Premium (WoP) Rider.

What are the features of the ICICI Pru Smart Kid Guarantee Plan?

Provides life insurance coverage for the entire policy term.
Offers flexibility to choose the duration of guaranteed income based on your child’s future needs.
Option to receive guaranteed income that remains constant or increases annually during the payout period.
Money-back benefit allows you to reclaim 0% to 100% of the total annualized premiums paid.
Money-back payouts can begin any year after the policy term ends.
Eligible for tax benefits as per the prevailing tax regulations.

Who is eligible for the ICICI Pru Smart Kid Guarantee Plan?

Premium payment term	Policy term	Income Period	Min/Max Age at entry	Min/Max Age at maturity
5 years	8 to 10 years	5/7/10/12/15/20/25/30 years	18/55 years	18/65 years
6 years	8 to 11 years			18/66 years
7 years	8 to 12 years			18/67 years
8 years	9 to 13 years			18/68 years
9 years	9 to 14 years			18/69 years
10 years	10 to 15 years			18/70 years
11 years	11 to 16 years			18/70 years
12 years	12 to 17 years			18/70 years
Premium payment frequency	Annual, Half-Yearly, Monthly

What are the benefits of the ICICI Pru Smart Kid Guarantee Plan?

1. Death benefit

In the event the person whose life is covered by this policy (known as the Life Assured) passes away during the term of the ICICI Pru Smart Kid Guarantee Plan policy, the Death Benefit will be paid out as a lump sum.

Death Benefit is highest of:

Sum Assured on Death (defined as Death Benefit multiple X Annualized Premium)
105% of the Total premiums paid up to the date of death
Death Benefit Factor X Maturity Sum Assured X {number of months for which premiums are paid up to date of death / (12 X Premium Payment Term)}
Surrender value payable as of the date of death

Since Waiver of Premium (WoP) Rider is an in-built feature, get a waiver on all future premiums on the occurrence of unforeseen events like Death, Accidental Total Permanent Disability, Terminal Illness or Critical Illness.

This feature ensures that the ICICI Pru Smart Kid Guarantee Plan policy benefits, such as regular payouts and maturity payouts will be provided without any interruption.

In case of death of the Life Assured during the Income Period, the claimant will continue to receive the Guaranteed Income and Money Back Benefit.

At any time during the Income Period, the Claimant shall have the option to receive the discounted value of future income and Money Back Benefit

2. Income benefit

You have the option to select whether you want to receive guaranteed income that either

remains at the same level throughout the Income Period or
increases every year at a simple interest rate of 5% p.a.

3. Money-back benefit

(payable at maturity)

You can choose to receive any percentage from 0% to 100% of the total of all annualized premiums known as a Money Back Benefit. You will need to select the percentage of Money Back at inception.

The lower the money-back benefit percentage, the higher the income benefit (annual regular income) and vice versa.

Grace Period, Discontinuance and Revival of ICICI Pru Smart Kid Guarantee

Grace period

A grace period of 15 days will be given for payment of the due instalment premium for monthly frequency, and 30 days will be given for any other frequency.

Discontinuance

If you stop paying premiums in the first years, no benefits will be payable.

If you stop paying premiums after you have completed payment of premiums for the first year, the ICICI Pru Smart Kid Guarantee Plan policy can continue with reduced benefits.

Revival

You can revive your ICICI Pru Smart Kid Guarantee Plan policy benefits for their full value within five years from the due date of the first unpaid premium.

Free Look period for ICICI Pru Smart Kid Guarantee Plan

You have an option to review the ICICI Pru Smart Kid Guarantee Plan policy terms and conditions.

If You are not satisfied or have any disagreement with the terms and conditions of the Policy, then you can return the policy within 30 days from the date of receipt of the Policy Document, whether received electronically or otherwise.

Surrendering the ICICI Pru Smart Kid Guarantee Plan

You can Surrender the ICICI Pru Smart Kid Guarantee Plan policy at any time after payment of at least one full year’s Premiums. Prior to receipt of one full year’s premium, no surrender value is payable.

On policy surrender, you will get higher of the following:

Guaranteed Surrender Value (GSV)

Special Surrender Value (SSV)

What are the advantages of the ICICI Pru Smart Kid Guarantee Plan?

Enjoy the flexibility to receive income on a date of your choice with the “Save the Date” option.
Built-in Waiver of Premium feature ensures income benefits continue uninterrupted in any circumstance.
Option to receive all future benefits as a lump sum at a discounted value for added convenience.
The Low Cover Income Booster option allows you to increase your income by opting for a lower life cover.
Once the ICICI Pru Smart Kid Guarantee Plan policy attains surrender value, you can avail a loan of up to 80% of the surrender value.

What are the disadvantages of the ICICI Pru Smart Kid Guarantee Plan?

While you can choose from various options for Income Benefits and Money-Back Benefits, these choices are fixed once selected at the start of the policy and cannot be altered later.
Life cover does not continue during the income payout period.
The Money-back Benefit impacts the income Benefit, requiring a trade-off between the two.
The income benefit may end up in discretionary expenses.

Research Methodology of ICICI Pru Smart Kid Guarantee Plan

The ICICI Pru Smart Kid Guarantee Plan allows you to customize your Income and Money-Back Benefits, with the added appeal of guaranteed returns.

These features might seem attractive, but it’s important to evaluate whether the plan truly benefits you. This requires analysing its Internal Rate of Return (IRR). Let’s consider an example:

Benefit Illustration – IRR Analysis of ICICI Pru Smart Kid Guarantee Plan

A 35-year-old male opts for the ICICI Pru Smart Kid Guarantee Plan with a 10-year Income Benefit and 100% Money-Back Benefit at maturity.

The ICICI Pru Smart Kid Guarantee Plan policy has a sum assured of ₹10.7 lakhs, a premium-paying term of 10 years, and a policy term of 11 years, with an annual premium of ₹1.01 lakh.

Male	35 years
Sum Assured	₹ 10,70,000
Policy Term	11 years
Premium Paying Term	10 years
Annualised Premium	₹ 1,01,298

The initial income benefit is ₹93,190, increasing annually by 5% (simple interest). A Money-Back Benefit of ₹10 lakhs is paid along with the final income benefit.

Upon calculation, the IRR for this cash flow is 5.39% as per the ICICI Pru Smart Kid Guarantee Plan maturity calculator.

Age	Year	Annualised premium / Maturity benefit	Death benefit
35	1	-1,01,298	10,70,000
36	2	-1,01,298	10,70,000
37	3	-1,01,298	10,70,000
38	4	-1,01,298	10,70,000
39	5	-1,01,298	10,70,000
40	6	-1,01,298	10,70,000
41	7	-1,01,298	10,70,000
42	8	-1,01,298	10,70,000
43	9	-1,01,298	10,70,000
44	10	-1,01,298	10,70,000
45	11	0	10,70,000
46	12	0
47	13	93,190
48	14	97,850
49	15	1,02,510
50	16	1,07,170
51	17	1,11,830
52	18	1,16,490
53	19	1,21,150
54	20	1,25,810
55	21	1,30,470
56	22	11,35,130

	IRR	5.39%

Considering the overall investment period of over 20 years, this return is disappointing for a long-term investment. Ideally, such investments should at least keep pace with inflation.

An IRR of around 5% means your money’s purchasing power is eroded over time. With such low returns, the Guaranteed Income Benefit of the ICICI Pru Smart Kid Guarantee Plan offers little financial advantage.

ICICI Pru Smart Kid Guarantee Plan Vs. Other Investments

The regular income offered by the ICICI Pru Smart Kid Guarantee Plan does not provide favourable returns for investors.

Let’s explore alternative investment options that offer life insurance and regular income. Using the same parameters as the previous example, here’s a comparative analysis:

ICICI Pru Smart Kid Guarantee Plan Vs. Pure-term + ELSS

A pure term insurance plan with a sum assured of ₹11 lakhs costs ₹9,000 annually for a policy term of 11 years and a premium-paying term of 5 years. In contrast, the ICICI plan required a 10-year premium payment.

This means that for the first 5 years, after paying the term insurance premium, the remaining amount can be invested, and from the 6th year onward, the entire allocated amount is available for investment.

Pure Term Life Insurance Policy
Sum Assured	₹ 10,70,000
Policy Term	11 years
Premium Paying Term	5 years
Annualised Premium	₹ 9,000
Investment	₹ 92,298

Based on individual risk appetite, the funds can be invested in either debt (low-risk) or equity (high-risk) instruments. In this comparison, the balance is invested in ELSS funds, a tax-saving equity investment option.

Age	Year	Term Insurance premium + ELSS	Death benefit
35	1	-1,01,298	11,00,000
36	2	-1,01,298	11,00,000
37	3	-1,01,298	11,00,000
38	4	-1,01,298	11,00,000
39	5	-1,01,298	11,00,000
40	6	-1,01,298	11,00,000
41	7	-1,01,298	11,00,000
42	8	-1,01,298	11,00,000
43	9	-1,01,298	11,00,000
44	10	-1,01,298	11,00,000
45	11	0	11,00,000
46	12	0
47	13	93,190
48	14	97,850
49	15	1,02,510
50	16	1,07,170
51	17	1,11,830
52	18	1,16,490
53	19	1,21,150
54	20	1,25,810
55	21	1,30,470
56	22	25,18,124

	IRR	8.55%

The corpus accumulated during the investment phase is utilized during the income period to provide regular payouts, similar to the ICICI plan’s income benefit. The final withdrawal mirrors the Money-Back Benefit offered by the ICICI plan.

ELSS Tax Calculation
Maturity value after 12 years	23,55,908
Purchase price	4,61,490
Long-Term Capital Gains	18,94,418
Exemption limit	1,25,000
Taxable LTCG	17,69,418
Tax paid on LTCG	2,21,177
Maturity value after tax	21,34,731

ELSS Investment Phase: The pre-tax corpus value grows to ₹23.55 lakhs, and the post-tax value is ₹21.34 lakhs.

Income Period: This corpus is reinvested in an instrument offering a 7% annual return. Regular annual withdrawals are made, with the final withdrawal replicating the Money-Back Benefit.

Final Corpus: After annual withdrawals, the remaining corpus stands at ₹25.18 lakhs, with an IRR of 8.55%.

If withdrawals are avoided, the corpus compounds further, offering even higher returns. For regular income, it is more efficient to invest separately instead of combining insurance and investment.

This approach ensures better returns, liquidity, and flexibility, which are lacking in the ICICI Pru Smart Kid Guarantee Plan.

Final Verdict on the ICICI Pru Smart Kid Guarantee Plan

The ICICI Pru Smart Kid Guarantee Plan allows customization of Income Benefits and Money-Back Benefits. However, beyond these options, it operates much like a traditional Money-Back Policy, where premiums are paid in the early years, and benefits are received as regular income later.

Under this plan, the income benefit is not directly tied to the sum assured or premiums paid. Instead, it depends on the percentage of Money-Back Benefits you select. This Money-Back Benefit can be taken at maturity or during any year of the income period.

However, opting for a higher percentage of the Money-Back Benefit reduces the income benefit amount and it also has a high agent commission.

The trade-off between the final Money-Back Benefit and the income benefit limits the plan’s flexibility. Furthermore, the life cover is restricted to the premium-paying term.

Instead of relying on ready-made children’s education plans, consider investing separately for better returns and greater flexibility.

Build a diversified investment portfolio tailored to your risk appetite and life goals. Simultaneously, secure adequate life insurance by opting for a Pure Term Life Insurance Policy.

When it comes to financial advice, are Quora, Facebook, and Twitter the final word? For personalized guidance, consult a financial professional who can create a customized financial plan to help you achieve your objectives effectively.

ICICI Pru Smart Kid Guarantee Plan: Good or Bad? An Insightful Review

Table of Contents:

What is the ICICI Pru Smart Kid Guarantee Plan?

What are the features of the ICICI Pru Smart Kid Guarantee Plan?

Who is eligible for the ICICI Pru Smart Kid Guarantee Plan?