IRDA has approved a product whose brochure does not mention critical information of premium waiver in case of death of policyholder. While the company’s intent may not be in doubt, ambiguity is not good for insurer and the insured

Aegon Religare recently launched Educare, a traditional child plan. The product brochure does not mention about who pays future premium in case of death of the policyholder. While the insurer intends to offer waiver of premium (WoP), why does the brochure omit such an important line? Such elusiveness may be unintentional, but it is not in right spirit. It will only add to the confusion in case of any dispute. Strangely, the press release and website clearly specifies WoP and future premiums are waived respectively. The product brochure is important document as it is approved by Insurance Regulatory and Development Authority (IRDA).

Here is Aegon Religare response—“Educare Plan offers two ‘death benefit’ options the policyholder can select. If you refer to the payouts offered in both the options, one of them reads as—Guaranteed payouts as per the schedule above. This means that the policy continues as the premium is waived off by Aegon Religare Life Insurance. It is phrased differently to explain the same feature.”

But guaranteed payouts as per the schedule does not mention anything about who will pay the premium. It just specifies the guaranteed payment schedule in the last four years of the policy term. It is like saying we will take you from source to your destination, but the question is who will pay for the journey? It has to be explicitly stated and not as an implicit connection of dots.”

According to one broking firm, “Aegon Religare Educare does not mention anything about the future premium being waived both in option1 and option2 explicitly. However this may not be the intent. They have death benefits clearly defined in both the options.”

It can’t be assumed that every child plan will offer WoP and vice-versa not all plans which offer WoP is a child plan. There is no standardisation and every insurer drafts its brochure in its own way. As long as it clearly states important points, it is good customer service.

Reliance child plan, SBI Life Scholar II and ICICI Pru Smart Kid clearly state WoP in the brochure. Kotak Child Edu plan and Kotak Child Future plan states—No need to pay future premiums. Bajaj Allianz Childgain specifies “Premium waiver benefit”. There can be other flavours, too. IDBI Federal Childsurance Dreambuilder states—If either of parents dies, all future premiums are waived and invested as lump-sum in the plan.

Let’s hope Aegon Religare EduCare product gives a decent bonus to help save for child education. The plan gives guaranteed lump sum payouts during the last four policy years. It pays 50%, 25%, 25% and 20% of sum assured plus any declared bonus. The annual premium for a 30 year old person paying premium for 16 years (20 year policy term) and sum assured of Rs5 lakh is Rs44,590. It means you will pay premium of over Rs7 lakh for getting Rs6 lakh at end of 20 years. The only thing that will save you is bonus, which is non-guaranteed. Will you really be saving for child education?

Traditional child plans are popular due to secured returns, even if they are low. This is due to the appeal that parents are setting aside money for safe investment as well as covering the risk in case of their absence.