Aegon Life Child Plans
Aegon life child plan offers a Rising Star insurance plan. Rising Star insurance plan makes provision for your child’s milestone so that no financial problem would occur. Rising Star insurance plan makes sure that your children’s future is safe and secure. Since it is an investment plan, a component or a portion of it can be invested in the market.
It is a unit-linked plan and provides high returns if invested. Being a linked individual non-participating plan, the plan participates in the profits of the segregated funds of the company. You select these funds up to the allocated units. However, the policyholder does not give any rights over the profits or surplus of the company.
Understanding the Aegon life child plan with an example
Mr. Kumar, aged 34 years, works in a private organization. His wife is an educator. They have a 2-year-old son Aryan. Although Kumar and his wife earn well for their son and their family, Kumar is still concerned about the rapid changes that may occur. He is also concerned about the inflation and education expenses that might occur.
Moreover, he understands that his son’s future needs to be protected at all times. He decides to take Aegon Life’s Rising Star Insurance Plan. The details of the plan are below:
- Sum Assured or Cover Amount – Rs. 10 lakhs
- Policy Term is 25 minus age of entry of child = 23 years
- Premium Payment Term - 23 years
- Annual premium - Rs. 60,000
- Option selected – Invest Protect
If Mr. Kumar dies in an accident after 4 years:
- Year 4 – Rs. 10 lakhs paid as life cover.
- 60,000 paid annually as income benefits. A payout can be used for a child’s future milestone or a child’s education.
- Maturity payout - @8% Rs. 26, 81, 574 @4% Rs. 15,64,924
Benefits of Aegon life child plans
The death benefit in child plans is comprised of two components:
- Base death benefit – The base fund value or the base plan premiums that were paid by the holder of the policy will form the fund value, which determines Base Policy Benefits.
- Top-up death benefit- if applicable – For the top-up death benefit, the fund value is built from the top-up premiums paid by the plan holder.
Base death benefit
If the life assured, unfortunately, dies before the maturity date. If all base plan premiums have been paid, then the company will be liable for the following:
- If the Base Sum Assured is higher or 105% of the Base Plan Premium is higher, then the higher amount is paid till the date of death of the nominee. If there is no nomination as on the date of death of the life assured, then the amount is paid to the policyholder’s legal heirs. The claimant is how the nominees or legal heirs are referred to as individually or collectively.
- The base fund value will remain invested, and the nominee receives this amount on the maturity date of the policy. However, on the date of intimation of the death of the life assured, the base fund value as of this date is reallocated as per the ‘Invest Protect Option’ asset allocation scheme.
- The base death benefit pays to the nominee an amount that is equal to the Base Plan Premium at the onset of every policy year till the date of maturity in Aegon life child plans. The maturity benefit amount is also paid after the policy year in which the death intimation was received. It will be paid on a pro-rata basis. On the maturity date of the policy, the nominee receives a lump sum base fund value.
Top-up death benefit
In case the life assured dies, before the date of maturity of the policy, the claimant receives the top-up sum assured. This is given if a top-up fund exists in the policy. At least 105% of the top-up premiums already paid will comprise the top-up death benefit.
The top-up fund value will continue to be invested and will be paid out to the nominee on the date of maturity of the policy. The claimant is not entitled to benefits such as partial withdrawal, premium redirection, top-up premium, change of investment portfolio strategy, switch, or any other benefits that were allowed for the policyholder. However, discontinuance is allowed for the claimant.
If the claimant discontinues the policy, the discontinuance value is given to the claimant. This value is added to the present value of the future base plan premium. The calculation of the present value of future base plan premium will be as per the following formula:
(75% x (total of outstanding premium waiver benefit + total of outstanding income benefit))
If the life assured dies before the maturity date of the Aegon life child plans and the plan has been discontinued, the claimant of the plan-holder is paid out the outcome of the discontinuance policy fund. It is paid out on the date of intimation of death to the company. At this point, after the payout, the policy will terminate.
If the Settlement period has been opted for and the life assured dies during this period, the death benefit will be paid to the nominees or claimants.
Whilst life assured is alive, and the nominee dies, the policy will remain in continued status. The policyholder can include another nominee (child). A written notice has to be given to the company to do this. All the terms and conditions of the policy, which includes the maturity period, remain the same. If the policyholder does not have another child, then anyone can be made the nominee.
Upon survival of the life assured up to the maturity date of the plan, the following options can be chosen:
- Receive lump sum amount on the date of maturity, the base fund value plus top-up fund value.
- Use the settlement option
At various times during the term of the policy, the insurer may add units to the policy account of the insured. This is the net yield on the fund value and complies with IRDAI regulations on the deposit of it in the Aegon life child plans policyholder’s account.
Top-up premium is premium payment additional to base plan premium. It can be made at any time during the policy. It cannot be made any time in 5 years leading to the maturity date of the policy. Top-up premium payment is subject to certain conditions:
At the time of making the application for top-up premium, the base plan premium till the date of application should have been paid in full.
The top-up premium amount should not be less than Rs. 5000. This benchmark limit can be changed by the company. At any time during the policy term, the sum of top-up premiums paid should not be more than the sum of base plan premiums paid.
A top-up premium increases the sum assured amount. The minimum increase is 1.25 times the amount topped up. The maximum increase is 10 times the amount topped up. An increase in the sum assured is contingent on the board-approved underwriting rules of the insurer. If the top-up premium is rejected by the company, then the top-up premium paid is returned to the policyholder without any interest charged.
The top-up premium is used to create Units. Units are created in the segregated funds. It will be made as per the asset allocation proportion. On the date the top-up premium is made, the units will be created. If a base plan premium is due, and the received top-up premium amount is less than the due amount of base plan premium, the top-up premium is not accepted. If the top-up premium received is more than the base plan premium amount due to the Aegon life child plans, the due base plan premium amount is paid first, and the remaining is used to allocate units. From the date of creation of units, the top-up premium units that were created will be in a lock-in period for 5 years.
If a top-up fund value exists, any partial withdrawal request is first deducted from this fund value if this fund value supports partial withdrawals. Partial withdrawals will subsequently be allowed from the base fund value as well. This option cannot be used after the death of the life assured.
Free look-in period
The policyholder is advised to review all terms and conditions of the plan. In case of not being satisfied with any of the terms and conditions, the policy document can be returned. A letter has to be enclosed stating the reasons for returning the policy. The look-in period is 15 days. If the policy was purchased via distance marketing mode, the look-in period is 30 days. The insurer then cancels the policy and will refund the premium paid. A deduction of a risk premium amount is made along with the deduction for expenses incurred by the insurer. These expenses are concerning the medical examination of the proposer by the life insurance company and stamp duty charges.
Distance marketing mode is any activity of solicitation that generated the sale of the insurance product to the policyholder through certain modes. These modes are telephone marketing, short messaging service, electronic mode, email, Internet, interactive television, physical mode, direct postal, mail, newspaper, magazine inserts, etc.
A policy is discontinued if the premium is unpaid even at the expiry of the grace period in the Aegon life child plans. The policy is treated based on whether the premium payment was discontinued during the lock-in period (first 5 years) or not.
If the policy was discontinued during the first five years of the policy term, the discontinuance value is credited to a fund named ‘Discontinuance Policy Fund’. The discontinuance value is computed as the total fund value minus the discontinuance charge of the policy year in which the first premium was unpaid. Once the discontinuance policy fund is activated, any risk cover or rider cover part of the plan will also cease.
Within 3 months, the policyholder gets to communicate the status starting from the first date of the unpaid premium. The following options will be provided to the policyholder:
- The option to revive the plan within 36 months
- Complete surrender or withdrawal from the policy without any life cover
If the first option is chosen and the policy is not revived during the period for revival, the discontinued policy proceeds are paid out after the revival period or lock-in duration, whichever is later. In case the revival period is after the lock-in period, the discontinuance fund will continue to hold the policy until the completion of the revival period. The charges applicable during this period are the fund management charges and no other charges will be applicable.
If none of the options are selected, the policy continues without risk and rider cover and the fund in the policy remains invested in the discontinuance fund. The proceeds or the output of the discontinuance fund is paid out after the lock-in period of the Aegon life child plans, and post-this, the policy terminates.
There is also the option to terminate the policy. This can be done anytime. If this is done, the proceeds of the discontinued policy fund are payable after the lock-in duration or policy surrender date, whichever is later.
During the lock-in, if the policy is in discontinuance status, the death benefit is computed as the value of the discontinued policy fund. Investment of a discontinued policy fund is done in a diversified portfolio that consists of government securities and short-term maturity money market instruments. The main objective of this fund is to generate investment income. The fund has a guaranteed return of 4% per annum. Surplus income earned over the minimum guaranteed return is apportioned back to the fund. Asset allocation is 60% - 100% in fixed interest, 0% - 40% in money market instruments etc.
If the policy is discontinued after the lock-in period, that is, if the premium is not paid, then the policy is covered into a reduced paid-up plan with an approximated reduced sum assured. The ratio of the total premiums paid to the original premiums payable is taken. The sum assured is multiplied with this ratio. This is the new sum assured. The policy continues to be in the reduced paid-up status sans rider cover, if any such rider exists, until the conclusion of the revival period. During the revival period, all charges as per the terms and conditions of the Aegon life child plans are deducted. However, there is a difference in the way mortality charges are computed – it is based only on the reduced paid-up sum assured.
The status of the policy is communicated with 3 months of the first unpaid premium. The options provided in this communication are to revive the policy within 3 years and surrender the policy. In case the former option is chosen, and the policy is not revived during the revival period, the fund value at the end of the revival period is paid to the policyholder. In case the latter option is chosen, the proceeds of the discontinued plan will be remitted and the policy terminates.
Policy revival of Aegon life child plans
From the date of the first unpaid premium to up to three consecutive years is the policy revival period. In this period, the policyholder can revive the policy if it lapses. Once the policy has been revived, the risk cover is restored. Investments made in segregated funds are restored as well. Applicable charges are not levied without any interest or charges if the policy revival is during the lock-in period. All unpaid and due premiums are collected, and if there are any riders, they are revived as well.
Policy administration charges and premium allocation charges may be levied. If there are guaranteed charges, these are levied as well. The fund is added back to the discontinuance charges that were deducted when the plan was discontinued.
The settlement option in Aegon life child plans must be requested to be activated by the company. The request can be made anytime, but at least 90 days before the policy maturity date. When this option is taken, at the maturity date of the policy, the units in the policy can be redeemed periodically and in installments. Over a period of time, the units can be redeemed, where the time to redeem is always less than the settlement period. The first installment is paid to the policyholder on the date of maturity of the policy.
During the settlement period, the insurer:
- Deducts on the fund management charges and mortality charges. No other charges are applied.
- No base plan premium or top-up premium is accepted.
- Switches are not allowed.
- Partial withdrawals are not allowed
- If during the settlement period, the life assured unfortunately dies, the claimant is paid out the death benefit.
When this option is exercised on Aegon life child plans, on each policy anniversary, fund value would be rebalanced. The rebalancing is in line with the opted asset allocation. On the policy anniversary, at the time of auto-rebalancing, an auto-switch exists between the funds. It ensures that the fund mix as recommended in the latest asset allocation scheme is maintained. The auto-rebalancing option cannot be exercised after the death of the policyholder.
Invest Protect Option
All base plan premiums will be invested as per the following way if Invest Protect Option has been opted for.
- Accelerator fund is where all base plan premiums and top-up premiums minus premium allocation charges are deposited to be invested. The option activates either on the policy conception date or on the date the option has been requested to be activated. The funds will stay invested during the entire length of the policy term except in the 3 years before the maturity date. The 3 policy years before policy maturity are 3rdlast policy year, 2nd last policy year, and the last policy year.
- In the 3rdlast policy year, all received base plan premiums minus premium allocation charge will put into the Stable Fund to be invested.
- In the 2ndlast policy year, all received base plan premiums minus premium allocation charge will be put into the Debt Fund.
- In the last policy year, all base plan premiums minus premium allocation charge will be put into the Secure Fund.
Automatic switching of units from one fund to another happens in the following manner:
Event 1: In the 3rd last policy year, on each monthly date, 10 percent of the units, as at the third last policy year, will be transferred to the Stable Fund. It will be done until all units are transferred from the accelerator to the stable fund. The last switch will be the accelerator fund’s residual units.
Event 2: In the 2nd last year, 10 percent of the units, on each monthly date, as at the onset of the 2nd last policy year, will be switched from Stable to Debt fund. The switching will happen until all units are switched. The stable fund’s residual units will be part of the last switches.
Event 3: In the last policy year of the Aegon life child plans, 10 percent of the units as at the onset of the last policy year will be switched from debt to secure fund. The switching will happen until all units are switched. Residual units in the debt fund will be the last to be switched.
The policyholder can select this option any time during the policy term. The selection or alteration of the Invest Protect Option after the policy commencement date will become effective from the next policy anniversary onwards.
Switching amongst segregated funds
A switch application form should be duly filled and submitted to apply for the switch of funds. This is done so that funds can be switched from one segregated fund to another segregated fund. The administrative rules of the insurer govern the usage of the switch facility.
Partial and systematic partial withdrawals
After the lock-in period, anytime during the policy term, the policyholder can make partial withdrawals, provide that all base plan premium payments have been made. Partial withdrawal minimum amount should not be less than Rs. 5000/. The minimum age of the person withdrawing the funds should not be less than 18. The maximum partial withdrawal limit is 20% of the fund value at the beginning of the policy year. The balance of the remaining fund value after partial withdrawal should not be less than two times the annual premium. The top-up fund value is used first for any partial withdrawal request, provided the top-up fund value has sufficient balance. If there is no sufficient balance, partial withdrawals from the base fund value are made.
In case of systematic partial withdrawal, the withdrawal can be exercised monthly, quarterly, or annually. Policy units will be redeemed by the company providing Aegon life child plans, once this option is chosen, to make the payments as per the specified frequency and amount. An installment cannot be less than Rs. 2000. The deposits into the account of the policyholder is made through ECS (electronic clearance service) of banks. There is no charge levied by the company for the systematic partial withdrawal facility.
Premium redirection of Aegon life child plans
As per the allocation proportions chosen by the insured, the base plan premiums and top-up premiums after deduction of premium allocation charge will be invested in unit-linked funds. Policyholders have the freedom to alter their allocated proportions into the available unit-linked funds. On all future premiums received, the altered allocations are affected.
Base sum assured increase
During the policy term, the base sum assured can be increased. A board-approved underwriting is required to approve such an increase. Following the acceptance by the company, the base sum assured increase will become applicable from the next monthly date. This option is unavailable during the revival period and also not available after the death of the life assured.
The policy will terminate on the following, whichever comes earliest:
- If discontinued, the discontinued policy fund proceeds are paid on a date. This date is the policy termination date
- If the policy has not been revived even at the end of the revival period, the policy terminates on the first date after the revival date
- If the fund value falls below and is inadequate or the fund value is equal to an annual base plan premium
- The date of surrender of the policy and if the surrender value has been paid towards Aegon life child plans
- Policy maturity date and if no settlement option has been taken yet.
- Under the settlement option, the date of last payment. The fund value will still be paid only if the fund’s value is inadequate for the applicable mortality charges deduction during the settlement period
- On the intimation date of the death of the life assured
- On the intimation date of the death of the nominee after the death of the life assured
Premium allocation charges
A percentage of the base plan premium is computed as the premium allocation charge.
1st year 2 – 5 year 6 – 10 year 11th year onwards 4.4% 3% 2% 1%
3% of the top-up premium is the top-up premium’s premium allocation charge.
From the allocated premiums, applicable goods and services tax will be deducted as a separate fixture.
Policy administration charge of Aegon life child plans
Along with the applicable Good and Services tax, the policy administration charge will be deducted. It will be done by unit cancellation. The prevailing unit price is used for the unit cancellation. On the first monthly date onwards of the policy term, the deduction starts to happen. For the first policy year, the charge is Rs. 60 per month. The charge increases by 3% per annum from the first policy anniversary onwards. The charge can go up to only Rs. 500 per month.
Fund management charge
For the accelerator and stable funds, the fund management charge is 1.35% per annum. This charge is levied at the time of computation of the unit price. For the debt fund and secure fund, 1.10% and 1.00% per annum are the fund management charges. 0.50% per annum is the fund management charge for discontinuance of the policy. Fund management charges can be increased except for the discontinuance policy fund.
No charge will be levied for up to 4 switches in a policy year. For subsequent switch requests, a charge of 0.1% of the amount switched is levied, provided that the minimum and maximum switch transaction amounts are Rs. 100 or Rs. 500. The switch charges are collected by the cancellation of units.
Premium redirection charge
The permitted number of premium redirections in a year are two – any subsequent premium redirection incurs a charge of Rs. 200. The charge can be revised by the company.
Segregated funds of Aegon life child plans
Policyholders pool their money into specific funds for the mutual benefit of all. These funds are called segregated funds. It is a specific fund, separate by nature. Only the company reserves the right of discretion to manage the funds. The insurer also holds legal and beneficial interests in the segregated fund assets.
|Sr No||Segregated fund||Identification number|
Ans: It is an insurance for children that combines the benefits of insurance cover as well as investment. A corpus of wealth is built over a period of time. It can be utilized for crucial milestones of the child.
Ans: The notable features of Aegon life child plans are as follows:
- Plans offer market-linked returns
- Even after the death of the policy premium payer, the policy benefits continue. Future premiums are waived. The child is not burdened with any premium payment. Therefore it is a very viable plan to take for children.
- There is flexibility in determining the frequency of payout received. It could be either lumpsum or at regular intervals.
Ans: It is a segregated fund. It is constituted for a specific reason. It is constituted by the fund value. The rate stipulated by the IRDAI will be the minimum guaranteed income on the policy.
Ans: It is value in Rupees of each unit of invested fund of Aegon life child plans computed as per the prevailing market conditions.