Nath Balakrishnan

WITH the birth of a child come responsibilities for parents. The burgeoning cost of education make it imperative to secure the financial future of the child especially if an unfortunate development were to befall the parents. Starkid, a child endowment policy from Tata AIG addresses this need. A look at some of the features of this recently launched plan.

How the plan works

Form 30-day infants to eight-year-olds can be covered under this plan. The policy requires a health declaration for the child and the parent. The premium paying term is limited to 10 years. The child starts receiving benefits once it turns 18. Twenty per cent of the sum assured is paid out every year till the child completes 22. Over and above this, is a guaranteed lumpsum payment equivalent to five years' premiums.

From the sixth policy year on, the child would be entitled to a simple reversionary bonus, which will accrue and be paid on the maturity of the policy. A terminal bonus may also be paid. The bonus rates are not guaranteed and will be a function of the company's investment performance.

Death and disability benefit

In the event of the death or disability of the parent before the end of the premium payment term, premium payment for the rest of the policy term is waived. Thematurity benefits will, however, be paid after the child turns 18. Should the payer of the premium die or suffer disability after completion of the premium-paying term and before the child turns 18, 50 per cent of the sum assured would be paid out immediately and, as in the earlier scenario, the benefits to the child would kick in once it turns 18. If the child dies, the entire sum assured along with the guaranteed additions, reversionary and terminal bonus would be paid, irrespective of any payout made earlier.

Premium-paying term

The premium can be paid annually, semi-annually, quarterly or monthly.

Guaranteed surrender value

The plan acquires a guaranteed surrender value after premiums have been paid for at least three consecutive quarters. This value is 30 per cent of the total premium paid, excluding that paid in the first year of the policy.

Suitability

Plans such as these bring about the discipline of saving to provide for the financial needs of the child at a later date. Those who would like to build a corpus to fund important events in their child's life such as entry into college or marriage could consider such a plan.

Readers are requested to compare products featured under this column with similar ones offered by other players.

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