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All about mutual funds with insurance cover

By Nivesh Gyan   20 June

Category: Build Wealth

While mutual funds remain the best saving instrument, insurance ensures financial security at the time of crisis. When mutual funds come with the added insurance cover, it sounds like an icing on the cake.

Let’s get into the details of mutual funds with insurance benefits and find out if it’s a wise choice or not!

What are mutual funds with insurance cover?

  • There are some mutual fund companies including Birla Sun Life Mutual Fund, Reliance Capital Asset Management Company and ICICI Prudential Mutual Fund, that provide a complimentary life insurance cover to their SIP investors investing in certain schemes.
  • The cover provided is a term insurance policy, where the insurance company pays out money only in case of death of the investor.

Is there a minimum period of investment in mutual funds with investment cover?

Yes, if the investor stays invested for at least three years, only then he is eligible for insurance.

What if the investor exits the fund before 3 years?

The cover ceases if SIP is discontinued before the completion of three years.

A few more important things to know!

  • Maximum sum assured is about 10 times the SIP instalment in year one, about 50 times in year two and about 100 times in year three.
  • The facility is available to all investors in a few select schemes till the last SIP instalment or 55 years of age, whichever is earlier.
  • Most of the policies cover insurance immediately after the commencement of SIP. However, only accidental deaths are covered for the first 45 days.

Why do mutual funds with free insurance cover make sense?

  • They come with a benefit of free life insurance cover.
  • Investors don’t have to pay premium for life cover.
  • The insurance cover will be used to pay the SIP amount in case the investor dies.

A few words of caution!

  • There is an exit load of up to 2%.
  • Insurance is just a free component. One must select well rated funds first and then opt for the add-on to enjoy the extra benefit at no additional cost.
  • While you opt for this feature while starting an SIP with the mutual fund, at time of claim, you would need to deal with the insurance company. The AMC does not gaurantee claim settlement.
  • If you discontinue your SIP within three years, you will lose your insurance coverage.
  • It will cover only the first unitholder. The second and third unitholders do not get any insurance cover.

Comparison of the schemes from different mutual fund companies



Particulars
Aditya Birla Sun Life
Mutual Funds
Reliance Mutual Fund
ICICI Prudential Mutual Fund
Scheme Name
Century SIP(CSIP)
SIP Insure
SIP Plus
Insurance cover if SIP Continues
Year 1 – 10 times the monthly CSIP installment
 
Year 2 – 50 times the monthly CSIP installment
 
Year 3 onwards – 100 times the monthly CSIP installment
 
All the above mentioned limits are subject to maximum cover of Rs. 25 lakhs per investor across all schemes/plans/folios.
Year 1 – 10 Times the Monthly SIP Installment
 
Year 2 – 50 Times the Monthly SIP Installment
 
Year 3 onwards – 120 times the Monthly SIP Installment
 
All the above mentioned limits are subject to maximum coverage of Rs. 21 lakhs per investor
Year 1 – 10 times of monthly SIP Insure installment
 
Year 2 – 50 times the monthly SIP Insure installment
 
Year 3 onwards – 100 times the monthly SIP Insure installment
 
All the above mentioned limits are subject to maximum coverage of Rs.50 lakhs per investor across all schemes/plans/folios.
Exit Load
2% if redeemed / switched out within 1 year;
1% if redeemed /switched out after 1 year but up to 3 years;
Nil thereafter
The load structure prevalent at the time of enrolment shall govern the investors during the tenure of the SIP Insure
1% if redeemed within 1 year;
Nil thereafter