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As a parent, you would want the best for your child.
But what if something were to happen to you unexpectedly?
Who will be able to give the best possible care for your child in your absence?
Exactly why you should be considering a backup plan for your child to be taken care of financially.
Here, SBI Life Insurance Child Plan – Smart Scholar is a life insurance plan for parents who have children aged between 0 and 17.
At the end of the policy term, the maturity value accumulated in your fund value can be used for your child’s higher education, marriage, etc.
In case you are not around, SBI Life Insurance Child Plan – Smart Scholar protects your child’s future by paying the fund value at the end of the policy term to your child.
Let us do an in-depth analysis of how SBI Life Insurance Child Plan – Smart Scholar
Table of Contents:
1.) What is SBI Life Insurance Child Plan – Smart Scholar?
2.) Features of SBI Life Insurance Child Plan – Smart Scholar
3.) Benefits of SBI Life Insurance Child Plan – Smart Scholar
4.) Fund Options of SBI Life Insurance Child Plan – Smart Scholar
5.) Free look-up period of SBI Life Insurance Child Plan – Smart Scholar
6.) The Grace period, Discontinuance & Revival of SBI Life Insurance Child Plan – Smart Scholar
7.) Surrendering your SBI Life Insurance Child Plan – Smart Scholar
8.) Various Charges of SBI Life Insurance Child Plan – Smart Scholar
9.) Advantages of the SBI Life Insurance Child Plan – Smart Scholar
10.) Disadvantages of the SBI Life Insurance Child Plan – Smart Scholar
12.) IRR of SBI Life Insurance Child Plan – Smart Scholar: Example with an illustration
13.) SBI Life Insurance Child Plan Vs PPF + Pure Term Insurance
14.) SBI Life Insurance Child Plan Vs ELSS + Pure Term Insurance
15.) Final Verdict on SBI Life Insurance Child Plan – Smart Scholar
What is SBI life insurance child plan – Smart Scholar?
SBI Life Insurance Child Plan is an Individual, Unit Linked, Non-Participating Life Insurance Product. This is a ULIP that offers life protection as well as savings.
It claims to fulfil your child’s dream requiring heavy finances by accumulating corpus based on market returns.
Will this give better ROI? Let us explore.
Features of SBI Life Insurance Child Plan – Smart Scholar:
- It gives the twin benefit of an insurance cover and market-linked returns.
- You can pay premiums for a limited period, whereas the policy benefits would continue.
- Inbuilt Waiver of premium benefit to ensure a continuance of your policy.
- Accidental Death benefit and Accidental Total and Permanent Disability (Accidental TPD) benefit, is an integral part of the plan.
- Based on your risk tolerance, you have the flexibility to choose from 9 funds ranging from equities to debt funds.
- Regular Loyalty Additions to boost your investments.
Eligibility Criteria of SBI Life Insurance Child Plan – Smart Scholar:
| Minimum | Maximum | |
| Age at entry | Parent (Life Assured): 18 Years | Parent (Life Assured): 57 Years
Child: 17 Years |
| Child: 0 Years | ||
| Age at Maturity | Child: 18 Years | Parent (Life Assured): 65 Years
Child: 25 Years |
| Plan type | Single premium / Limited Premium up to the policy term | |
| Policy term | 8 – 25 years | |
| Premium paying term | Single premium or 5 to 25 years | |
| Basic Sum Assured | Limited Premium up to the policy term: 10 x Annualised Premium
Single Premium: 1.25 x Single Premium |
|
Premium paying term:
| Plan Type | Premium Frequency | Minimum (in Rs) | Maximum (in Rs) |
| Single | Single | 75000 | No Limit, Subject to Board Approved Underwriting Policy |
| PPT greater than or equal to 8 years: | Yearly | 24000 | |
| Half-Yearly | 16000 | ||
| Quarterly | 10000 | ||
| Monthly | 4000 | ||
| PPT 5 Years to 7 Years | Yearly | 50000 | |
| Half-Yearly | 25000 | ||
| Quarterly | 125000 | ||
| Monthly | 4500 |
Benefits of SBI Life Insurance Child Plan – Smart Scholar:
Death benefit:
If the policyholder passes away during the policy term (other than by accident), then the nominee will receive either of the two benefits mentioned below:
Benefit 1: A lump sum benefit equal to higher of the Basic Sum Assured or 105% of the total premiums received up to the date of death will be payable.
Benefit 2: The insurer continues to pay your future premium(s) on your behalf (in-built Premium Payor Waiver Benefit) and the accumulated fund value will be paid at maturity.
In case of accidental death or accidental total and permanent disability, Additional benefit equal to Accident Benefit Sum Assured is payable.
Maturity benefit:
If the policyholder survives throughout the policy term, then the policyholder will get the total fund value paid in the form of a lump sum either to the policyholder; if he/she survives
(or)
Their Child, in case of death of the Life-Assured during the policy term.
Loyalty Addition:
It is offered for all policy terms irrespective of premium frequencies. Depending on your policy term, it would be given for in-force policies on completion of specific durations.
The same will be added through the allocation of units at the end of the relevant policy year.
1% x [Average fund value over the 1 day of the last 24 policy months].
Other Benefits of SBI Life Insurance Child Plan – Smart Scholar:
Premium Payor Waiver Benefit (PPWB):
It is an inbuilt feature under this Insurance product. In case of death of the life assured, SBI Life Insurance Company will pay all the future premiums at respective future premium dates.
On maturity of the policy term, the child will be entitled to receive the Total Fund Value.
Accident benefit:
It is also an inbuilt feature, where the benefit differs as mentioned below:
- Accidental Death – Accident sum assured will be paid in a lump sum.
- Accidental Total Permanent Disability – Accident sum assured will be paid in 10 equal annual instalments.
However, the policy will continue with basic life benefits and you would continue to pay all the due premiums thereafter.
Fund Options of SBI Life Insurance Child Plan – Smart Scholar:
Investment can be done in any one or any combination of the below-mentioned funds (in multiples of 1%)
| S no | Fund name | Risk Profile | Asset allocation | ||
| Equity | Debt | Money market | |||
| 1 | Equity Fund | High | 80-100% | 0-20% | 0-20% |
| 2 | Top 300 Fund | High | 60-100% | – | 0-40% |
| 3 | Equity Optimizer Fund | High | 60-100% | 0-40% | 0-40% |
| 4 | Growth Fund | Medium to High | 40-90% | 10-60% | 0-40% |
| 5 | Balanced Fund | Medium | 40-60% | 20-60% | 0-40% |
| 6 | Bond Fund | Low to Medium | – | 60-100% | 0-40% |
| 7 | Money Market Fund | Low | – | 0-20% | 80-100% |
| 8 | Bond Optimizer Fund | Low to Medium | 0-25% | 25-75% | 0-25% |
| 9 | Pure Fund | High | 80-100% | – | 0-20% |
Flexibility option:
Switching Option: The policyholder is allowed to take up to two switches free of charge in a policy year and more than that, a charge of 100 will be levied per switch. The Minimum switch amount is Rs. 5000.
Premium Redirection: Allowed from the 2nd policy year onwards. One premium redirection request is allowed free of charge in each policy year and over that, a charge of 100 will be levied per redirection request.
Partial withdrawals: Available from the 6th policy year onwards, provided the policyholder has paid at least 5 premiums. The Minimum Partial withdrawal amount allowed is 5,000 & the maximum is 15% of the current fund value.
Free look-up period of SBI Life Insurance Child Plan – Smart Scholar:
If the policyholder is not satisfied with the terms and conditions of SBI Life Insurance Child Plan – Smart Scholar after purchasing the policy, then the policyholder can return the policy by stating the return within 15 days from the date of purchasing the policy.
The free look-up period will be 30 days if the policy is purchased through electronic mode.
The Grace period, Discontinuance & Revival of SBI Life Insurance Child Plan – Smart Scholar:
Grace period:
SBI Life Insurance Child Plan offers a grace period of 30 days for Yearly, Half-yearly & Quarterly modes of premium payment and 15 days for monthly modes of premium payment.
Discontinuance:
If SBI Life Insurance Child Plan is discontinued during the first 5 policy years:
Upon expiry of the grace period, the fund value after deducting the applicable discontinuance charges shall be credited to the discontinued policy fund and the risk cover and rider cover, if any, shall cease. On the first business day of the 6th policy year, the fund value would be paid to the policyholder.
If SBI Life Insurance Child Plan is discontinued after the first 5 policy years:
Upon expiry of the grace period, the policy will be converted into a reduced paid-up policy. You can either revive or completely withdraw from the policy.
Revival:
SBI Life Insurance Child Plan’s revival period is 3 years from the date of your first unpaid premium, during which you can revive your policy, by paying all due premiums without any interest or fee.
Surrendering your SBI Life Insurance Child Plan – Smart Scholar:
If surrender is requested during the first 5 Policy Years, then
Your Fund Value after deduction of applicable discontinuance charge (if any), will be transferred to the ‘Discontinued Policy Fund’ (Interest – 4% p.a.).
Fund Management Charge of Discontinued Policy Fund shall be deducted. The Fund Value will be payable on the 1st working day of the 6th policy year.
If the surrender is requested any time after the completion of 5 policy years, then
The fund value will be paid immediately to the policyholder.
Various Charges of SBI Life Insurance Child Plan – Smart Scholar:
Premium Allocation charges
| Policy Year | Limited Premium Paying Term (up to Policy Term) | Single Premium Policy |
| 1 | 6.00% | 3.00% |
| 2 | 4.50% | NA |
| 3 | 4.50% | NA |
| 4 | 4.00% | NA |
| 5 | 4.00% | NA |
| 6 | 1.00% | NA |
| 7 | 1.00% | NA |
| 8 | 1.00% | NA |
| 9 | 1.00% | NA |
| 10 | 1.00% | NA |
| 11th year onwards | 0.00% | NA |
Policy Administration Charges:
A monthly Policy Administration Charge of Rs. 50 per month shall be deducted & the capital is Rs. 500 per month.
Fund Management Charges:
| Fund name | Fund Management charges |
| Equity Fund | 1.35% |
| Top 300 Fund | 1.35% |
| Equity Optimizer Fund | 1.35% |
| Growth Fund | 1.35% |
| Balanced Fund | 1.25% |
| Bond Fund | 1.00% |
| Money Market Fund | 0.25% |
| Bond Optimizer Fund | 1.15% |
| Pure Fund | 1.35% |
| Discontinued fund | 0.50% |
Discontinuance Charges:
For Single Premium Policies:
| Year of Discontinuance | For Single Premium up to 3,00,000 | For Single Premium above ` 3,00,000 |
| 1st year | Lower of 2% of (Single Premium or Fund Value) subject to a maximum of 3,000 | Lower of 1% of (Single Premium or Fund Value) subject to a maximum of 6,000 |
| 2nd year | Lower of 1.5% of (Single Premium or Fund Value) subject to a maximum of 2,000 | Lower of 0.70% of (Single Premium or Fund Value) subject to a maximum of 5,000 |
| 3rd year | Lower of 1% of (Single Premium or Fund Value) subject to a maximum of 1,500 | Lower of 0.50% of (Single Premium or Fund Value) subject to a maximum of 4,000 |
| 4th year | Lower of 0.5% of (Single Premium or Fund Value) subject to a maximum of 1,000 | Lower of 0.35% of (Single Premium or Fund Value) subject to a maximum of 2,000 |
| 5th year onwards | Nil | Nil |
For other than Single Premium Policies:
| Year of Discontinuance | For Annual Premium up to 50,000 | For Annual Premium above 50,000 |
| 1st year | Lower of 20% x (AP or FV) subject to a maximum of 3,000 | Lower of 6% x (AP or FV) subject to a maximum of 6,000 |
| 2nd year | Lower of 15% x (AP or FV) subject to a maximum of 2,000 | Lower of 4% x (AP or FV) subject to a maximum of 5,000 |
| 3rd year | Lower of 10% x (AP or FV) subject to a maximum of 1,500 | Lower of 3% x (AP or FV) subject to a maximum of 4,000 |
| 4th year | Lower of 5% x (AP or FV) subject to a maximum of 1,000 | Lower of 2% x (AP or FV) subject to a maximum of 2,000 |
| 5th year onwards | Nil | Nil |
Mortality Charges:
The SBI Life Insurance Child Plan’s mortality charges will be based on your age and the sum at Risk at the time of charge deduction.
Premium Payor Waiver Benefit (PPWB) Charges:
These charges are deducted on the first business day of each policy month from the fund value by way of cancellation of units.
Accident Benefit Charges:
Monthly Charges (for in-force policies) = Accident Sum Assured x (Annual rate / 12)
Where the Annual rate is `0.50 per 1000 Accident Sum Assured.
Switching Charge:
A charge of 100 is applicable for every switch, more than two free switches in the same policy year during the policy term.
Partial Withdrawal Charge:
A charge of 100 is applicable for every partial withdrawal over one free partial withdrawal in the same policy year.
Advantages of the SBI Life Insurance Child Plan – Smart Scholar:
- There are 9 different fund options to choose from.
- Loyalty additions to boost your fund value.
- Accident Benefits & Premium payor waiver benefits are inbuilt features (rider) of the policy.
- Partial withdrawal is allowed from the 6th policy year.
- The dual benefit of an insurance cover and market-linked returns.
- Tax benefits under Sec 80 C & Sec 10(10D) of the Income tax act, 1961.
Disadvantages of the SBI Life Insurance Child Plan – Smart Scholar:
- As SBI Life Insurance Child Plan is a Unit Linked Insurance product, it does not offer any liquidity during the first five years of your contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the policy’s fifth year.”
- There is no Loan option available to the policyholder.
- Though Accident Benefit & Premium payor waiver benefit are in-built features (rider) of the policy, the premium is deducted before it is invested.
- The premium gets invested only after deducting the various charges.
You can read further details of the SBI Life Insurance Child Plan in its brochure.
Research Methodology:
Since we have all the information we need, now it’s time to analyze this SBI Life Insurance Child plan – Smart Scholar by calculating its IRR for the worst-case scenario and the best-case scenario by using the SBI Life Insurance Child plan online calculator.
Then let us compare the IRR of the SBI Life Insurance Child Plan with other alternate investments to see which gives you a better return in the long run.
IRR of SBI Life Insurance Child Plan – Smart Scholar: Example with an illustration:
Let us assume,
Mr Shyam (parent) age – 35 years
Child’s age – 5 years
Policy term (PT) – 20 years
Premium Payment term (PPT) – 20 years
Premium – ₹ 1, 00,000 p.a
Basic Sum Assured: ₹ 10, 00,000
Fund – 100% Equity fund
Now let’s calculate the IRR for the worst-case scenario.
Here in the worst-case scenario, let us take the assumed gross return as 4% p.a
Then,
| At 4% p.a. | |||
| Age | Year | Annualised premium / Maturity benefit | Death benefit |
| 36 | 1 | -1,00,000 | 10,00,000 |
| 37 | 2 | -1,00,000 | 10,00,000 |
| 38 | 3 | -1,00,000 | 10,00,000 |
| 39 | 4 | -1,00,000 | 10,00,000 |
| 40 | 5 | -1,00,000 | 10,00,000 |
| 41 | 6 | -1,00,000 | 10,00,000 |
| 42 | 7 | -1,00,000 | 10,00,000 |
| 43 | 8 | -1,00,000 | 10,00,000 |
| 44 | 9 | -1,00,000 | 10,00,000 |
| 45 | 10 | -1,00,000 | 10,00,000 |
| 46 | 11 | -1,00,000 | 10,00,000 |
| 47 | 12 | -1,00,000 | 10,00,000 |
| 48 | 13 | -1,00,000 | 10,00,000 |
| 49 | 14 | -1,00,000 | 10,00,000 |
| 50 | 15 | -1,00,000 | 10,00,000 |
| 51 | 16 | -1,00,000 | 10,00,000 |
| 52 | 17 | -1,00,000 | 10,00,000 |
| 53 | 18 | -1,00,000 | 10,00,000 |
| 54 | 19 | -1,00,000 | 10,00,000 |
| 55 | 20 | -1,00,000 | 10,00,000 |
| 23,43,641 | |||
| IRR | 1.49% | ||
The fund of Rs. 1,00,000 invested annually by Mr Shyam at the rate of 4% will accumulate into Rs. 23,43,641 in 20 policy term years of the SBI Life Insurance Child Plan.
Here, the IRR works out to be 1.49% which is lower than a savings bank account interest.
In the best-case scenario, let’s take the assumed gross return as 8%. Then,
| At 8% p.a. | |||
| Age | Year | Annualised premium / Maturity benefit | Death benefit |
| 36 | 1 | -1,00,000 | 10,00,000 |
| 37 | 2 | -1,00,000 | 10,00,000 |
| 38 | 3 | -1,00,000 | 10,00,000 |
| 39 | 4 | -1,00,000 | 10,00,000 |
| 40 | 5 | -1,00,000 | 10,00,000 |
| 41 | 6 | -1,00,000 | 10,00,000 |
| 42 | 7 | -1,00,000 | 10,00,000 |
| 43 | 8 | -1,00,000 | 10,00,000 |
| 44 | 9 | -1,00,000 | 10,00,000 |
| 45 | 10 | -1,00,000 | 10,00,000 |
| 46 | 11 | -1,00,000 | 10,00,000 |
| 47 | 12 | -1,00,000 | 10,00,000 |
| 48 | 13 | -1,00,000 | 10,00,000 |
| 49 | 14 | -1,00,000 | 10,00,000 |
| 50 | 15 | -1,00,000 | 10,00,000 |
| 51 | 16 | -1,00,000 | 10,00,000 |
| 52 | 17 | -1,00,000 | 10,00,000 |
| 53 | 18 | -1,00,000 | 10,00,000 |
| 54 | 19 | -1,00,000 | 10,00,000 |
| 55 | 20 | -1,00,000 | 10,00,000 |
| 37,07,729 | |||
| IRR | 5.57% | ||
As per the SBI Life Insurance Child Plan online calculator, at the end of the policy term, we get an IRR of 5.57% and Rs. 37,07,729 as a maturity benefit.
You still can’t consider it as an inflation-beating rate of return.
Note: These are not guaranteed returns and they are not higher or lower limits of returns as Unit Linked Life Insurance products are subject to market risks.
SBI Life Insurance Child Plan Vs PPF + Pure Term Insurance:
Let us see how investing with a similar cash flow in the combination of PPF + Pure Term Insurance goes,
Here, the sum assured is assumed higher as this plan continues even after the death of the insured & also has a premium payor waiver benefit inbuilt.
Total Cash Outflow: Rs. 1,00,000 (14,500 + 85,500)
Pure Term Policy’s Sum assured: Rs. 1 crore
Premium to pay for: Rs. 14,500
Policy Term: 20 years
Balance amount to be invested in PPF: Rs. 85,500
| Term Insurance + PPF | |||
| Age | Year | Term Insurance premium + PPF | Death benefit |
| 36 | 1 | -1,00,000 | 1,00,00,000 |
| 37 | 2 | -1,00,000 | 1,00,00,000 |
| 38 | 3 | -1,00,000 | 1,00,00,000 |
| 39 | 4 | -1,00,000 | 1,00,00,000 |
| 40 | 5 | -1,00,000 | 1,00,00,000 |
| 41 | 6 | -1,00,000 | 1,00,00,000 |
| 42 | 7 | -1,00,000 | 1,00,00,000 |
| 43 | 8 | -1,00,000 | 1,00,00,000 |
| 44 | 9 | -1,00,000 | 1,00,00,000 |
| 45 | 10 | -1,00,000 | 1,00,00,000 |
| 46 | 11 | -1,00,000 | 1,00,00,000 |
| 47 | 12 | -1,00,000 | 1,00,00,000 |
| 48 | 13 | -1,00,000 | 1,00,00,000 |
| 49 | 14 | -1,00,000 | 1,00,00,000 |
| 50 | 15 | -1,00,000 | 1,00,00,000 |
| 51 | 16 | -1,00,000 | 1,00,00,000 |
| 52 | 17 | -1,00,000 | 1,00,00,000 |
| 53 | 18 | -1,00,000 | 1,00,00,000 |
| 54 | 19 | -1,00,000 | 1,00,00,000 |
| 55 | 20 | -1,00,000 | 1,00,00,000 |
| 37,95,224 | |||
| IRR | 5.77% | ||
Here, the IRR works out to be 5.77% which is still more compared to the IRR of SBI Life Insurance Child Plan at its assumed gross returns of 4% and 8%
But if your risk tolerance is higher, you can try other alternatives as mentioned below.
SBI Life Insurance Child Plan Vs ELSS + Pure Term Insurance:
Let us see how investing with a similar cash flow in the combination of ELSS + Pure Term Insurance goes,
Here, the sum assured is assumed higher as this plan continues even after the death of the insured & also has a premium payor waiver benefit inbuilt.
Total Cash Outflow: Rs. 1,00,000 (14,500 + 85,500)
Pure Term Policy’s Sum assured: Rs. 1 crore
Premium to pay for: Rs. 14,500
Policy Term: 20 years
Balance amount to be invested in ELSS: Rs. 85,500
| Term insurance + ELSS | |||
| Age | Year | Term Insurance premium + ELSS | Death benefit |
| 36 | 1 | -1,00,000 | 1,00,00,000 |
| 37 | 2 | -1,00,000 | 1,00,00,000 |
| 38 | 3 | -1,00,000 | 1,00,00,000 |
| 39 | 4 | -1,00,000 | 1,00,00,000 |
| 40 | 5 | -1,00,000 | 1,00,00,000 |
| 41 | 6 | -1,00,000 | 1,00,00,000 |
| 42 | 7 | -1,00,000 | 1,00,00,000 |
| 43 | 8 | -1,00,000 | 1,00,00,000 |
| 44 | 9 | -1,00,000 | 1,00,00,000 |
| 45 | 10 | -1,00,000 | 1,00,00,000 |
| 46 | 11 | -1,00,000 | 1,00,00,000 |
| 47 | 12 | -1,00,000 | 1,00,00,000 |
| 48 | 13 | -1,00,000 | 1,00,00,000 |
| 49 | 14 | -1,00,000 | 1,00,00,000 |
| 50 | 15 | -1,00,000 | 1,00,00,000 |
| 51 | 16 | -1,00,000 | 1,00,00,000 |
| 52 | 17 | -1,00,000 | 1,00,00,000 |
| 53 | 18 | -1,00,000 | 1,00,00,000 |
| 54 | 19 | -1,00,000 | 1,00,00,000 |
| 55 | 20 | -1,00,000 | 1,00,00,000 |
| 63,90,768 | |||
| IRR | 10.12% | ||
Here the IRR works out to be 10.12%, which is not only an inflation-beating return but also a very better return compared to SBI Life Insurance Child Plan – Smart Scholar.
SBI Life Insurance Child plan – Smart Scholar Vs. PPF / ELSS:
| IRR (Post tax) | Sum Assured | Final Maturity Value (post-tax) | |
| SBI – Smart Scholar (@ 4%) | 1.47% | 10 Lakh | 23,43,641 |
| SBI – Smart Scholar (@ 8%) | 5.57% | 10 Lakh | 37,07,729 |
| Term Insurance + PPF | 5.77% | 1 Crore | 37,95,224 |
| Term Insurance + ELSS (Post-tax) | 10.12% | 1 Crore | 63,90,768 |
In the case of the death of the policyholder during the policy term, Rs. 10 lakh is paid which will still not be sufficient to meet any expenses for your child’s future.
Final Verdict on SBI Life Insurance Child Plan – Smart Scholar:
Compared to other alternate investments, SBI Life Insurance Child Plan did not give an inflation-beating return.
So, if you don’t want to take any investment risk, then you can go for risk-free investments such as PPF, RBI Bonds, etc.
If you want to take investment risk to earn better maturity value, then you can choose an equity mutual fund with the help of your financial planner.
As for the insurance plan, compared to ULIP, you can choose an individual insurance plan at a low cost with high life coverage.
In conclusion, analyzing SBI Life Insurance Child Plan makes it clear that it’s not a one-stop solution for your child’s financial future.
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