I had taken a child plan - Aviva Young Scholar Advantage in 2011 and have been paying ₹4000 per month since then. I have paid a total of ₹2.6 Lakhs and the Fund Value today is ₹2.63 Lakhs after 5 Years. I feel cheated.
- Harsha Kiran
Child plans are insurance policies which are either traditional policies or unit linked plans where you life is covered and the child is the nominee. Aviva Young Scholar Advantage plan is a unit linked plan. In these type of plans, from the premium you pay, the insurer deducts charges towards life insurance (mortality charges), administration expenses and fund management charges. Only the balance amount is invested. Due to these costs, the residual investment in the ULIP may give lower returns even if the market is doing well. These type of policies are sold hard due to attractive commissions for the agent.
We recommend that you surrender this plan now to minimise your future losses. There is a 5-year lock in period in this policy which you have completed, hence there will be no surrender charges or tax liability on surrender. The surrender value will be the fund value as on the date of surrender.
Do not mix your insurance and investment needs in future. Always buy a pure term life insurance to buy an adequate cover to protect your goals against any contingency. Term insurance products are ideal for insurance cover because they have very low premiums.
The investment need for your children will most likely be a long term investment. You can build a corpus for your child through a good balanced fund or equity fund. Use SIPs and invest across 3-4 fund houses.