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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 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 the 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!

  • The maximum sum assured is about 10 times the SIP installment 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 installment 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 the benefit of free life insurance cover.
  • Investors don’t have to pay a 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 a SIP with the mutual fund, at the time of claim, you would need to deal with the insurance company. The AMC does not guarantee 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 Reliance ICICI Prudential
Scheme Name Birla Sun Life MF’s Century SIP Reliance’s SIP Insure Systematic Investment Plan Insure facility (SIP Insure)
Minimum Investment Amount Rs. 1,000 per month Monthly SIP: Rs 500 per month

Quarterly SIP: Rs1500 per quarter

Yearly SIP: Rs 6000 per year

Rs.1000/- for all schemes except ICICI Pru Tax Plan

Rs.500 for ICICI Pru Tax Plan

Maximum Investment Amount No upper limit to the monthly installment No upper limit to the monthly installment No upper limit to the monthly installment
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 lacs 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.20 lacs per investor across all schemes/plans/folios.

फिक्स्ड लोड  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 within1 year;
Nil thereafter