About the policy
The Young Star Plus (YSP) plan from HDFC Standard Life is another unit linked child plan, the earlier being Young Star. The plan aims to provide financial security to the child in case of the unfortunate demise of the parent/insured. The demise of the insured (i.e. parent) during the policy term leads to the sum assured being paid to the child. However, the policy continues until the end of the stipulated tenure with the insurance firm paying the premiums.

The Fact File

Parameters	Specifications
Type	Unit linked child plan
Min. annual premium (Rs)	10,000
Sum assured	5-40 times the annual premium paid
Options	1. Liquid (100% in bank deposits & money markets)
	2. Secure managed fund (100% in government securities)
	3. Defensive managed fund (70%-85% in government securities,15%-30% in equities)
	4. Balanced managed fund (40%-70% in government securities,30%-60% in equities)
	5. Equity managed fund (0%-40% in government securities,60%-100% in equities)
	6. Growth fund (100% in equities)
Entry age	With death benefit+critical illness benefit entry: 18-55 years, else 18-65 years
Riders	Critical illness
Tax benefits	Under Sec 80C, Sec 10(10 D)
Policy charges	In the 1st year: 10%-60%, 2nd year onwards: 1%
Fund management charges	0.80% of the fund's value for all options
Surrender charges	60% of the difference between regular premiums expected and received in the first year of the contract
Policy administration charge	Rs 20 per month
Switching charges	24 free switches, additional switch @ Rs 100
Partial withdrawal charges	More than 6 partial withdrawals will be charged @ Rs 250
Policy revival charge	Rs 250
Miscellaneous charges	More than 12 premium redirection requests will be charged @ Rs 250
	More than 6 policy servicing requests @ Rs 250

Comparison with peers
HDFC YSP offers a wider range of six investment options, across equity and debt segments to the policyholder as compared to comparable policies from other insurance companies-Tata AIG InvestAssure II (5 options), ICICI Smart Kid (4 options), Aviva Young Achiever (4 options).

The initial premium allocation charges for HDFC Young Star Plus (60.0% in the first year; 1.0% for the remaining years) are higher as compared to the competition. For instance, in Tata AIG InvestAssure II, the initial charges range from 17.5%-30.0% in the first year and 12.5%-25.0% in the second year. For ICICI Smart Kid, the charges are 20.0% for first year, 5.0% for years 2-5 and 2.0% for years 6-10; the charges range from 5.0%-7.0% for Aviva Young Achiever.

But YSP's policy administration charge of Rs 20 per month (pm) is on the lower side in comparison with Smart Kid (Rs 60 pm), InvestAssure II (Rs 38 pm) and Young Achiever (Rs 55 pm which increases by 5.0% every year).

In terms of fund management charges too, Young Star Plus is the most cost-effective at 0.80% per annum (pa) across all fund options. Compared to it, YSP's peers have higher fund management charges. For example, the fund management charges for Tata AIG InvestAssure II range from 0.90%-1.75% pa, while those for ICICI Smart Kid are 0.75%-1.50% pa. Policy holders in Aviva Young Achiever have to bear charges of 1.00%-1.50% pa.

Furthermore, YSP allows 24 free switches (across options) in a year, which is way ahead of that offered by Aviva (2 free switches), Tata AIG (4 free switches) and ICICI (4 free switches). It also allows the investor to make 6 free withdrawals in a year.

To better appreciate how each child plan stacks up on the expenses front, we have taken the case of a 30-Yr old, non-smoking healthy male who has taken a child plan from all 4 insurers. He pays an annual premium of Rs 10,000 for 15 years. We have assumed that he invests in the most aggressive option (highest equity) of all 4 insurers. We have assumed a growth rate of 10% CAGR (compounded annual growth rate) for all 4 child plans.

Our calculations show that Young Star Plus scores over the rest of the lot as far as returns are concerned (assuming that all 4 funds are ultimately invested in the same stocks; the difference in returns is due to the charges). The returns are approximately 23% higher than its nearest competitor. This could be attributed to its premium charges, which is 60% in the first year but tapers down to 1% in the following years and also its lower fund management and policy administration charges.

Our view
HDFC Young Star Plus scores over the competition on the following parameters:

1. Greater flexibility. The plan offers 6 investment options, the highest in our sample.

2. Higher number of free switches. The plan offers 24 free switches, which is much more than the competition. Although, we do not encourage parents to make frequent switches across options, the plan has nonetheless built in this flexibility.

3. Lower expenses. The plan has the lowest expenses in our sample. Not surprisingly, the savings in terms of lower expenses adds directly to the returns generated on the child plan.

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