The LIC New Children’s Money Back Plan 732 is a specialized life insurance product offered by the Life Insurance Corporation of India (LIC), designed primarily to meet the financial requirements of children and provide them with a bright financial future. As the name suggests, the plan focuses on children’s financial security, offering life coverage along with money-back benefits at specified intervals, making it an excellent choice for parents who want to ensure that their children’s future is financially secure, even in their absence.
In this detailed article, we will explore the features, benefits, eligibility criteria, and working mechanism of the LIC New Children’s Money Back Plan 732, and how it helps secure a child’s education, marriage, or other important life events. We will also provide an illustrative example to help you understand the working of the plan better.
1. Introduction to LIC New Children’s Money Back Plan 732
The LIC New Children’s Money Back Plan 732 is a traditional, non-linked, participating endowment plan specifically designed to meet the growing needs of children. The plan is structured to provide a combination of life insurance coverage and savings, making it an ideal tool for parents or guardians looking to invest in their child’s future.
The primary feature of this plan is the money-back benefit, where a portion of the sum assured is paid back at regular intervals, ensuring liquidity when the child reaches important milestones like educational expenses or marriage. Moreover, this policy ensures that the child remains financially protected, even if the policyholder (usually the parent or guardian) is no longer around.
The LIC New Children’s Money Back Plan 732 is designed to provide financial support at various points during the policy term, such as during the child’s education, marriage, or when they need funds for setting up a business or pursuing higher education.
2. Key Features of LIC New Children’s Money Back Plan 732
To understand how the LIC New Children’s Money Back Plan 732 works, it is essential to look at its core features in detail:
a. Policy Term Options
The policy term for LIC New Children’s Money Back Plan 732 can be chosen in such a way that the policy provides benefits at the time when the child needs them most. The plan offers policy terms of 25 years or 20 years, giving flexibility to parents.
- Policy Term: 20 years or 25 years.
- Risk Coverage: The policy provides risk coverage for the child, with the parent or guardian acting as the proposer. If the proposer passes away during the policy term, the child is entitled to receive the sum assured along with bonuses.
b. Money Back Benefit
The money-back feature of this plan is one of its most attractive aspects. The policyholder receives a portion of the sum assured at regular intervals during the policy term. These payments are intended to meet the child’s growing financial needs at various life stages.
- 20% of the Sum Assured is paid when the child attains the 18th year.
- 20% of the Sum Assured is paid when the child attains the 20th year.
- 20% of the Sum Assured is paid when the child attains the 22nd year.
- 40% of the Sum Assured is paid when the policy reaches its maturity (after the full policy term).
These payouts are made when the child reaches the milestone age, ensuring that the child receives financial support at different stages of their education or other key milestones in life.
c. Death Benefit
If the policyholder (usually the parent or guardian) dies during the policy term, the child is entitled to a death benefit. The death benefit consists of:
- Sum Assured on Death: This is the basic sum assured chosen by the policyholder at the time of purchasing the policy.
- Bonuses: Any bonuses accrued during the policy term are added to the death benefit.
- Accrued Money-Back Benefits: Any money-back benefits already paid out are not deducted from the death benefit.
This ensures that the child continues to be financially supported even in the unfortunate event of the policyholder’s death.
d. Bonus Facility
As a participating policy, the LIC New Children’s Money Back Plan 732 is eligible to receive bonuses. Bonuses are declared based on the company’s performance and surplus. The bonuses include:
- Reversionary Bonuses: These bonuses are declared annually and are added to the policy’s sum assured.
- Final Additional Bonus (FAB): A lump sum bonus may be paid upon the policy’s maturity or upon the death of the policyholder.
These bonuses enhance the maturity benefit and provide additional financial support for the child.
e. Maturity Benefit
At the end of the policy term, the policyholder receives the sum assured on maturity, along with any bonuses that may have accrued over the policy’s life. The total maturity benefit includes:
- Sum Assured on Maturity: The amount chosen at the time of policy purchase.
- Reversionary Bonuses: The bonuses added during the policy term.
- Final Additional Bonus (FAB): If applicable, this bonus is added at the time of policy maturity.
f. Loan Facility
The LIC New Children’s Money Back Plan 732 also allows policyholders to take out a loan against the policy’s surrender value. This loan can be availed in case of financial emergencies without having to surrender the policy.
The loan amount is typically up to 90% of the policy’s surrender value, providing liquidity when needed.
g. Tax Benefits
Like most LIC policies, the LIC New Children’s Money Back Plan 732 offers tax benefits under the Income Tax Act:
- Section 80C: The premiums paid towards the policy qualify for a tax deduction of up to ₹1.5 lakh per year.
- Section 10(10D): The death benefit and maturity benefit are exempt from tax, provided the conditions laid down by the Income Tax Act are met.
These tax benefits further enhance the attractiveness of the plan for parents seeking to save taxes while securing their child’s future.
3. Eligibility Criteria for LIC New Children’s Money Back Plan 732
The following eligibility criteria must be met to purchase the LIC New Children’s Money Back Plan 732:
- Minimum Age of Life Assured (Child): 0 years (policy can be taken for a child of any age).
- Maximum Age of Life Assured (Child): 12 years (for a policy term of 20 years); 11 years (for a policy term of 25 years).
- Minimum Age of Proposer (Parent/Guardian): 18 years.
- Maximum Age of Proposer (Parent/Guardian): 55 years (for a policy term of 25 years); 50 years (for a policy term of 20 years).
- Minimum Sum Assured: ₹1,00,000.
- Maximum Sum Assured: No upper limit, subject to underwriting guidelines.
- Premium Payment Mode: The premiums can be paid annually, half-yearly, quarterly, or monthly, depending on the policyholder’s preference.
4. Benefits of LIC New Children’s Money Back Plan 732
The LIC New Children’s Money Back Plan 732 offers a wide range of benefits, making it an attractive choice for parents who wish to secure their child’s financial future:
a. Financial Protection for the Child
The plan provides life coverage for the child, ensuring that even in the event of the policyholder’s untimely death, the child’s future remains financially secure. The death benefit ensures that the child receives full financial support in such situations.
b. Liquidity at Key Life Stages
The periodic money-back benefits ensure that the child has funds available when they need them most—whether it is for education, marriage, or other important milestones in life. The payouts are made when the child reaches the 18th, 20th, 22nd, and maturity years, ensuring that the child has access to financial resources during these important years.
c. Bonus Facility
The possibility of bonus declarations can significantly enhance the overall value of the policy. These bonuses, though not guaranteed, can add a substantial amount to the maturity benefit, making the policy a potentially high-return investment for the child’s future.
d. Tax Savings
The LIC New Children’s Money Back Plan 732 offers attractive tax-saving benefits under Section 80C for the premiums paid. The death and maturity benefits are also tax-exempt under Section 10(10D), providing additional financial advantages.
e. Loan Facility
The option to take a loan against the policy gives the policyholder flexibility in case of an emergency. The loan can be repaid over time, and it ensures that the child’s future is not compromised during tough financial times.
5. How Does LIC New Children’s Money Back Plan 732 Work?
Let’s understand how the LIC New Children’s Money Back Plan 732 works with the help of an example.
Example:
Let’s assume that Mr. Ravi, aged 35 years, purchases the LIC New Children’s Money Back Plan 732 for his child Riya, who is 5 years old. Mr. Ravi chooses a policy term of 20 years and a sum assured of ₹5,00,000.
- Policy Term: 20 years
- Sum Assured: ₹5,00,000
- Annual Premium: ₹25,000 (approx.)
- Premium Mode: Annually
Breakdown of Benefits:
- At the Age of 18 (in Year 13): Riya will receive 20% of the sum assured, which is ₹1,00,000.
- At the Age of 20 (in Year 15): Riya will receive another 20% of the sum assured, which is ₹1,00,000.
- At the Age of 22 (in Year 17): Riya will receive another 20% of the sum assured, which is ₹1,00,000.
- At the End of 20th Year (Policy Maturity): The remaining 40% of the sum assured (₹2,00,000) will be paid, along with any bonuses accrued during the policy term. Let’s assume the policy earns a bonus of ₹50,000, so the maturity benefit would be ₹2,50,000.
Death Scenario:
If Mr. Ravi were to pass away in the 10th year of the policy, the death benefit would consist of:
- Sum Assured on Death: ₹5,00,000.
- Bonuses: Any bonuses accrued until the point of death would also be added.
- Accrued Money-Back Benefits: These benefits would continue to be paid as if Mr. Ravi were alive, ensuring that Riya gets the required financial support.