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Sowmya Sundar

METLIFE Junior MB is a non-participating money-back policy for children. The policy is taken on the child and, hence, no benefit is payable on the death of the parent.

How it works?

You pay regular premiums for the full policy term, that is, 20 years. A guaranteed addition of Rs 100 per Rs 1,000 of the face amount will be added to the same at the end of every policy year.

These additions are not compounded, and paid out only on death or maturity. You get 20 per cent of the sum assured at the end of five, 10 and 15 years. On maturity, that is, after 20 years, you get back 40 per cent of the sum assured plus the accrued guaranteed additions.

To illustrate, for a sum assured of Rs 5 lakh, the payout will be Rs 1 lakh each on the fifth, 10th and 15th year. After 20 years, you will receive Rs 12 lakh as survival benefit. The payout includes Rs 2 lakh (balance 40 per cent of the SA) and Rs 10 lakh guaranteed addition (10 per cent of the sum assured accumulated for 20 years). The net returns on the policy works out to 6 per cent for Rs 5 lakh SA.

On death during the policy term, the sum assured plus the guaranteed additions is paid out regardless of the earlier payouts.

If death occurs before the life assured is seven years old, then the payout is restricted to refund of premiums received till date along with interest (at a rate to be determined by the company).

If premium payments are discontinued, the policy acquires a paid-up value with reduced sum assured (after three years' premium payments have been made). No riders are available with the policy.

Loan

A loan up to 90 per cent of the guaranteed surrender value can be taken against the policy after three years.

Suitability

If protection of the child against any unfortunate event befalling the parent is the prime objective, then this policy does not serve it. It only acts as a savings instrument. Therefore, one looking at lumpsum amounts at periodic intervals can opt for the policy as the return is attractive at 6 per cent and is guaranteed.

However, it helps in paying for your child's education or marriage only if the policy is taken when the child is under 5 years. That way, one can also benefit from the lower premium payments.

For instance, if the policy is taken at age 12, then a major portion will be paid out when the child grows up to be 32, when he/she would have crossed such milestones as higher education and marriage.

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