Believe me or not, this is a child plan which you should never purchase. Here is the HDFC SL Youngstar Super Premium review to clarify the pros and cons and why you should not buy it at any cost.
Most of the child insurance plans are sold using clever strategies and tactics. Indian parents are promised that if something happens to them, the future of their child will yet be safe. The company will keep paying the premium as per the insurance plan. Thus, when the child grows up, he/she will get a decent amount for purposes like higher education or marriage.
Now the question is – Do insurance companies love you or your child? The answer is clearly a big NO. You are just another customer who has been identified by a policy number. If that’s the case, why is so much concern shown while selling a child insurance policy? Because it is their business to sell policies using human emotions. If the insurance companies do not use emotions, how will they influence customer’s purchase decisions and sell their policies? It’s all a part of their well-devised marketing strategy. Anyways, I am diverting from the topic. Let us come back to the HDFC SL Youngstar Super Premium – Review and Returns.
I’ll answer the above-mentioned question at last – as on why future premiums are waived in case of unfortunate death of the proposer?
Also Read : Should I surrender my Jeevan Anand Policy?
HDFC SL Youngstar Super Premium – Eligibility
The minimum premium amount starts with 15,000 and there is no limit on the maximum premium.
The minimum policy term is 10 years whereas the maximum term of the policy is 20 years.
On top of it, there are plenty of options for maturity or death like settlement, etc. Insurance companies love to complicate their product and they do it for an evident reason. Otherwise, no one will buy their insurance products for investments. If you want more details on the product’s features, you can download the brochure by clicking on the below-mentioned link.
Since, I have already suggested you to avoid this product, explaining its features over here would be useless. Having said that, let us review the product and discuss why you should not buy it.
HDFC SL Youngstar Super Premium – Review
There are 2 major reasons for me being against ULIPs for investment purposes.
- Charges in ULIPs are so high that your returns go for a toss.
- There is no option for the exit before 5 years if your fund is not performing well enough. Returns can be good or bad in mutual funds too, but you have an exit option in equity mutual funds. You can review the mutual funds every year and get out of it if the fund is not performing well.
What are the charges in HDFC SL Youngstar Super Premium?
Also Read: ICICI Pru Elite Life Super Review
Premium Allocation Charges
- Year 1-7 – 4%
- Year 8+ – 1%
Let us suppose, you have purchased this policy. You’re paying a premium of 1 Lakh per annum for a term of 10 years. The company will deduct 4,000 per annum from your premium, every year, till the 7th Year. Then, it will deduct 1,000 per annum for the next 3 years. So, in total, you are going to pay premium allocation charges of 31,000 for a policy of 10 years.
Trust me, I have never understood the concept of premium allocation charges. Nonetheless, these charges are only meant for giving commission to the agents who sell the policy to customers.
Policy Admin Charges
I have copied policy admin charges straight from the brochure.
“A Policy Administration Charge of 0.25 % per month of the original annual premium will be deducted monthly and will increase by 5% per annum on every policy anniversary, subject to a maximum charge of 0.4% of the annual premium or ` 500, per month, whichever is lower. This charge will be taken”
It turns out to be 3% of your annual premium. And, as you can see, these charges are not reducing, they are increasing. When the premium allocation charges reduce in the 8th year, policy admin charges are there to cover up the same.
(Assuming a constant charge of 3% per annum). You would have to pay 30,000 as policy admin charges for a 10-year policy period.
So the total charges would be 61,000 considering both premium allocation and policy admin charges. That is 6.1% of your 10-year premium or 6.1% which was never invested.
Now, let’s come back to the question which was raised in the beginning. How do insurance companies pay the future premium after paying the sum assured in case the proposer dies? Here comes the concept of mortality charges.
Suppose you are aged 30 and want to opt for a term insurance cover of 1 Crore. The normal premium would be around 10,000 per annum. But if I increase the premium to 20,000, the cover will also increase to 2 crores, Right!
(This is just for illustration purposes, I have not taken the premium amount from any website).
The same exact thing is done in these types of plans. In these types of policies, the mortality charges are doubled. And, you think that the insurance company is giving you some gift which you won’t get again in your life.
Fund management charges are also high in ULIPs if you compare it to the direct plan of equity mutual funds. The fund management charges in ULIPs are 1.35%. Whereas in direct plans of equity mutual funds they’re 0.8%-1%.
Now, suppose that, out of 10 Lakhs, 61,000 are being deducted from the investments. In such a case, what kind of returns will you get?
If you want to invest in the stock market, why go through ULIP roots? Why not invest through equity mutual funds where you even have the option to exit if the fund isn’t performing well. Why do you have to get stuck for 5 long years?
Regarding the insurance part, you must go and get a term plan! The premiums are extremely cheap.
Do share your views if you have already bought this plan. What kind of returns are you getting from this plan? However, I am sure the returns would not be more than 6%-7%.
Till then, Keep Investing!