BOMBAY, 26 August — In today’s world of insecurity, insurance has become a norm. Almost all for a life insurance and some of the prudent ones, even insure for old age and illnesses. But how many really think about the children’s future? By children’s future, we do not mean insuring money for their future. What we mean is insuring your child’s education. There is not much of a future without education and when you want to give the best to your child, maybe it is time to insure your child’s education to ensure a better future.

This week, we focus some insurance policies which offer such a safety cover for children, if something unfortunate were to happen to their parents.

SBI Life Scholar

This policy focuses more on risk cover than investment. You can buy this policy any time before the child completes 16 years. Covers range from Rs.50,000 to Rs.10,00,000. The sum assured (SA) along with a bonus is paid in four equal installments when the child completes 18, 19, 20 and 21 years (premiums need not be paid in these years).

Alternatively, the SA can be withdrawn with the bonus in one lumpsum at the beginning (18 years) or at the end (21 years; the returns at the end of this period are compounded with the prevailing lending rate).

An amount equal to the SA along with the bonus accrued to date is payable on the parent’s death anytime during the plan’s tenure.

Besides this, the original SA is left untouched and will accrue to the child at the end of the tenure. An option lets you add accidental death and permanent disability (this option is a good idea as the sum assured doubles at the time of death, or becomes payable at the time of disability for a marginal premium of Rs.1 per Rs.1,000).

One of the plan’s highlights is that you are entitled to loans on 95 percent of the policy amount at attractive rates of interest.

Also, if you face an unforeseen financial crunch during the policy’s term, you may choose to cancel and receive the surrender value (to discourage this practice, the company will only refund you 60 percent of the premium paid after deducting the first year’s premium). SBI Scholar provides a good hedge against risk and the 2.5 percent guaranteed bonus provides a cap on the downside. Therefore, choose this plan if you are more inclined to protecting your children from any misfortune.

LIC Children’s Money Back Policy

This plan is structured similar to SBI’s Scholar. The SA varies between Rs.25,000 and Rs.10,00,000 and premium can be paid in a lumpsum. Survival benefits are payable only in four installments spaced two years apart at 18, 20, 22 and 24 years of the child’s age. The installments equal 20, 20, 30 and 30 percent of the SA, respectively. Additions become payable only after the child turns 26 (guaranteed additions are higher at 8 percent of the SA).

Death benefits are lower because the SA becomes payable only once ? At the time of death along with guaranteed and loyalty additions. Also, the risk cover commences only two years into the policy or after the child completes 7 years. This policy cannot be combined with an accident benefit, nor are loans advanced against it. However, a premium waiver benefit can be opted for, for extra premium. The Money-Back plan mediates between risk and return. Also, the paybacks are spread across a wider time horizon. This is a good investment option in the long run.

Bal Vidya

This single premium policy from LIC stipulates a premium higher than the SA at one go and is available for children less than 13 years. The policy is open to parents in the 20-49 age group, and in amounts ranging from Rs.25,000 to Rs.10,00,000.

The payback is also structured such that your investment is returned in stages, after two years or after the child completes 5 years.

The policy returns 1 percent of the SA every month when the child is less than 10 years, 2 percent when the child is 10-17 years, and 4 percent when the child is 18-23 years. When the child turns 18, a lumpsum equal to the SA is paid. Again, when the child turns 23, another amount equal to the SA, plus a guaranteed addition of 7 percent of the SA is paid. Loyalty additions too accrue when the term ends. If the policy-holder expires during the term, then only the SA is payable.

Bal Vidya is more suitable for investment returns, than providing a risk cover. Investing in this policy will involve a substantial capital outlay at the beginning of the term. However, the payback is spaced at regular intervals to enable availability of income, and the 8 percent guaranteed addition is a decent payoff which may more than adequately take care of the inflation.

ICICIPru Smart Kid

This policy is aimed at funding the child’s educational requirements. Besides life cover, you get regular returns at stipulated intervals, which are meant to take care of the child’s educational expenses. The big advantage is that you can fix the maturity for the policy for receiving final benefits. In addition, there will be regular cash flow at milestone years. For instance, if you take a policy in the name of your child who is aged 5 and fix the plan period as 17 years, your child will receive benefits at age 15, 17, 20 and 22 years. The educational expenses being minimal at the age of 15, the cash flow will be restricted to 20 percent of the sum assured and will be maximum at the age of 22, at 30 percent.