Nov 17, 2018 7 min read

Invest in SIP with Insurance to Gain Benefit of Free Insurance and Wealth Gain

Read this blog to know all about SIP with insurance cover facility of mutual funds.

Mutual funds are indeed one of the most promising investment options available in time. They are known to offer lucrative returns, product suiting different needs, and what not. This is the reason people have been so fascinated towards this investment avenue. With the facility of SIP with insurance, the investors can enjoy coverage against the uncertainties of life besides enabling them to accumulate wealth. Let’s find out all the ins and outs of this add-on feature of SIP investment.

What Is SIP with Insurance?

About three mutual fund houses provide an additional facility of life insurance cover to investors who invest via SIPs. This facility was launched previously, but it gained eyeballs after the introduction of LTCG in January 2018. It is subject to some particular conditions like that it would be a group insurance and not an individual insurance, etc. The investment should be made for at least a tenure of 36 months and the add-on feature will only be available in a few selected schemes of the fund house.

How Does it Work?

Once the investor decides on the SIP amount, then life cover in the first, second, as well as third year onwards will be a specific multiple of the set SIP amount, which could be even 10, 20, or 30 times. To explain this more precisely, let’s consider an example.
Say, the monthly SIP amount of a particular investor A is Rs 10,000. Then, the life cover in the 1st, 2nd, and 3rd year onwards will be Rs 1 lakh, Rs 2 lakh, and Rs 3 lakh, respectively.

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Fund Houses Offering SIP with Insurance Facility

Three of the prominent fund houses, namely ICICI Prudential AMC, Reliance Mutual Fund, and Aditya Birla Sun Life Mutual Fund have launched an additional feature, which is providing life insurance cover to the SIP investors. This life insurance cover is available to investors in only selected schemes of the above-listed fund houses. It is further directly proportional to the monthly SIP investments made by the respective investor. The utility feature provides coverage against the uncertainties of life and also enables investors to accumulate wealth in the long run.

Age Criteria of Investors Eligible for the Same Feature

Investors who are aged above 18 years and less than 51 years at the time of the first SIP investment are all eligible to opt for the SIP with insurance cover facility. In addition to this, the cover ceases as the investor crosses the maximum age as stated by the fund house. To know more about it, you can connect with the experts at MySIPonline who can help you with the process entirely.

How Much Life Cover Do They Offer?

Fund HouseLife CoverMaximum Life Cover in RsLife Cover Till Age (in years)
In 1st YearIn 2nd YearIn 3rd Year
Aditya Birla MF Century SIP 10 times 50 times 100 times 25 lakhs 60
ICICI Prudential MF SIP Plus 10 times 50 times 100 times 50 lakhs 55
Reliance MF SIP Insure 10 times 50 times 120 times 50 lakhs 55

Note: The maximum life cover is the total of all the existing investments in SIP Linked Insurance Schemes with particular AMCs.

This means that in case you’re investing Rs 10,000 as SIP in particular schemes with these listed AMCs, your life cover will be as follows:

Fund HouseLife Cover (in Rs)_
In 1st YearIn 2nd YearFrom 3rd Year Onwards
Aditya Birla MF Century SIP 1,00,000 5,00,000 10,00,000
ICICI Prudential MF SIP Plus 1,00,000 5,00,000 10,00,000
Reliance MF SIP Insure 1,00,000 5,00,000 10,00,000

What if You Exit Midway, Stop SIP, or Withdraw Partially?

The experts at MySIPonline explain this point telling that in any case if the investor discontinues the monthly investment before the completion of three years, then the insurance cover under the SIP Plus stops immediately. In case of SIP Plus is stopped after the completion of three years, the insurance cover is available equivalent to the value of the units so allotted as per their valuation on the first business day of the month in which the renewal confirmation has been given.

If there comes a situation where the investors discontinues SIP Insure plan after the completion of the minimum contribution period, i.e., three years, the assured sum will be equivalent to the fund value subject to the maximum of 120 times the monthly SIP instalment or maximum sum assured, i.e., Rs 50 lakh, whichever is low.

Besides this, there are some circumstances in the occurrence of which the insurance cover will be ceased to exit, this include:

  1. Partial or full redemption.
  2. Switch-out of units purchased under Reliance SIP Insure before completion of the compulsory tenure or even installments or before attaining the age of 55 years, whichever is earlier.
  3. Discontinuation of SIP installments before completing the minimum period of contribution, i.e., three years of the opted SIP tenure.

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Merits of Investing in SIP with Life Cover Option

One important advantage that SIP with insurance cover offers is that the scheme in which the investor is investing provides a free group insurance to the investor without any extra amount.

This insurance cover shall pay the SIP amount in case of premature death of the investor to achieve the set investment goal. To get an even bigger life cover, an investor would need to boost his Systematic Investment Plans. This indirectly boosts their wealth creation chances.

Expert’s Take

The experts at MySIPonline believes that if the investor is opting for such a scheme merely because it provides a free life insurance cover, then is a sub-optimal decision. Investment in mutual funds should be strictly based on the fund’s track record, fund manager's experience and consistency, and risk adjusted return strategy, etc.,, than a simple life cover benefit.

This add-on feature can, however, be opted by new investors with lower risk appetite. As it can provide them with additional protection to achieve their financial goals in the case of untimely death. However, as this feature is not available with every fund till date, and therefore this even restricts the choice of a good fund for investment.

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