LIC New Children’s Money Back Plan: A Comprehensive Guide
The Life Insurance Corporation of India (LIC) offers a wide variety of insurance products to suit the diverse needs of individuals at different life stages. One such plan is the LIC New Children’s Money Back Plan, which is designed specifically for parents who want to secure their child's financial future. It provides life insurance coverage for the child and ensures a systematic payout at crucial stages of their life, helping parents cover major financial milestones like higher education, marriage, or starting a career.
This plan is not just about securing the future of the child but also provides a sense of financial security for the parents, knowing that they are financially prepared to meet key expenses during their child’s formative years. In this detailed guide, we will explore the features, benefits, and working of the LIC New Children’s Money Back Plan, and why it is an excellent choice for securing a child’s future.
Overview of LIC New Children’s Money Back Plan
The LIC New Children’s Money Back Plan is a participating, non-linked money-back plan that offers both savings and protection. It is structured to provide periodic payouts, also known as survival benefits, at specific intervals that coincide with significant milestones in a child's life. In addition, the plan offers life cover for the child during the policy term, ensuring that the child’s financial needs are met even in the unfortunate event of the parent's death. The plan also participates in the corporation’s profit-sharing mechanism, which means that bonuses declared by LIC get added to the policy, enhancing the overall returns.Key Features of LIC New Children’s Money Back Plan
- Money Back Benefits: The plan offers money-back payouts at three critical stages in the child’s life. These payouts can be used to finance important expenses like education, higher studies, or even marriage.
- Life Insurance Coverage: The plan provides life insurance cover, ensuring financial protection for the family in case of the child’s untimely demise during the policy term. The death benefit will be payable regardless of the money-back payouts made during the policy term.
- Participating Plan: As a participating plan, the policyholder is eligible to receive reversionary bonuses declared by LIC. This increases the final payout at maturity or death.
- Maturity Benefit: If the policyholder survives the policy term, a lump sum amount is paid as a maturity benefit, which includes the remaining sum assured and any accrued bonuses.
- Flexible Premium Payment: The plan offers the flexibility to pay premiums annually, semi-annually, quarterly, or monthly, making it easier for policyholders to manage their finances.
- Tax Benefits: The premiums paid under this plan are eligible for tax deductions under Section 80C of the Income Tax Act, and the payouts received are also tax-free under Section 10(10D).
- Loan Facility: After the policy acquires a surrender value, the policyholder can avail of a loan against the policy to meet emergency financial needs.
- Auto Cover: After payment of premiums for a minimum of two years, if the policyholder is unable to pay future premiums, the policy acquires an auto cover feature. Under this, the life insurance cover will continue for a limited period even if premiums are unpaid.
Eligibility Criteria for LIC New Children’s Money Back Plan
To enroll in this plan, certain eligibility conditions must be met:- Minimum Entry Age of Child: 0 years (child can be as young as a newborn)
- Maximum Entry Age of Child: 12 years
- Policy Term: 25 years minus the child’s age at the time of purchasing the policy
- Minimum Sum Assured: ₹1,00,000
- Maximum Sum Assured: No upper limit, depending on underwriting
- Premium Payment Term: The premium payment term is equal to the policy term.
Survival Benefits (Money Back)
The policy is structured to provide survival benefits at three key stages of the child’s life, which typically coincide with their higher education or career milestones. The survival benefits are a percentage of the basic sum assured and are as follows:- At Age 18: 20% of the basic sum assured is paid to the policyholder.
- At Age 20: Another 20% of the basic sum assured is paid.
- At Age 22: The final 20% of the basic sum assured is paid.
Maturity Benefit
If the policyholder survives till the maturity date, they are entitled to receive the remaining 40% of the basic sum assured plus any accrued bonuses. This final lump sum payment at maturity can be used for important life events like higher studies or starting a business.Death Benefit
In the unfortunate event of the policyholder's death during the policy term, the death benefit is paid to the nominee. The death benefit is equal to the higher of:- Sum Assured on Death: 10 times the annual premium or 125% of the basic sum assured.
- Accrued Bonuses: All bonuses declared by LIC during the policy term.
Bonus Structure
Being a participating policy, the LIC New Children’s Money Back Plan is eligible for bonuses declared by LIC. These bonuses increase the overall payout at maturity or death, and include:- Simple Reversionary Bonus: This is the bonus declared annually and added to the policy. It is based on LIC's performance.
- Final Additional Bonus (FAB): This is an additional bonus that may be declared at the time of policy maturity or death of the policyholder. It is usually applicable for long-term policies.
Optional Riders
LIC New Children’s Money Back Plan also offers optional riders that can be added to enhance the coverage. These include:- LIC Premium Waiver Benefit Rider: This rider ensures that in the event of the policyholder’s death, all future premiums are waived, and the policy continues as usual. The survival benefits, death benefits, and maturity benefits are paid without any premium requirement after the death of the policyholder.
Advantages of LIC New Children’s Money Back Plan
- Regular Payouts: The survival benefits are paid at important milestones in the child’s life, ensuring that parents have funds available when they need them most.
- Life Insurance Coverage: The plan offers comprehensive life insurance coverage for the child, providing financial protection in case of an untimely demise.
- Bonus Additions: Since the plan participates in LIC’s profit-sharing mechanism, the policyholder benefits from bonuses, which enhance the final payout.
- Flexible Premium Payment: The option to choose premium payment frequency allows policyholders to manage their finances effectively.
- Tax Benefits: The premiums paid and the payouts received are eligible for tax benefits under Sections 80C and 10(10D), respectively.
- Loan Facility: After the policy acquires a surrender value, the policyholder can avail of a loan against the policy to meet emergency financial needs.
Limitations of LIC New Children’s Money Back Plan
- Moderate Returns: While the plan provides guaranteed survival benefits and bonuses, the returns are not as high as those from other investment products like mutual funds or equity-based plans. This plan is more suitable for risk-averse individuals looking for guaranteed returns and life insurance coverage.
- Long-Term Commitment: The policy requires a long-term commitment as the policy term lasts until the child turns 25. Surrendering the policy before completion may result in lower returns.
- Fixed Survival Benefit Amounts: The survival benefits are fixed percentages of the sum assured, which may not always align with the child’s financial needs at that stage.
Who Should Buy LIC New Children’s Money Back Plan?
This plan is ideal for parents who:- Want to provide financial security for their child’s future.
- Prefer a guaranteed source of funds at key stages of their child’s life (education, marriage, etc.).
- Are looking for a combination of life insurance coverage and savings.
- Prefer a risk-free investment option with bonus additions and tax benefits.
