A few mutual fund houses – Aditya Birla Sun Life, ICICI Prudential and Reliance – have bundled term life insurance cover with a few of their schemes. These bundled products have been christened as century SIP, SIP plus and SIP insure by the respective AMCs.
What is MF scheme with insurance cover?
A few fund houses provide free life insurance cover to their SIP investors. The insurance provided is essentially term insurance wherein the insurance company will pay out money only in case of death of the investor. This facility is available only on select schemes. In addition, the investor has to have an investment tenure of at least of 3 years to be eligible for this facility.
How does it work?
The insurance cover is proportional to SIP amount subject to an upper limit. Unlike other life insurance schemes your clients do not have to undergo any medical test but declaration of good health is mandatory.
Let us look at the features of SIP + insurance offered by different AMCs.
|
Aditya Birla Sun Life Insurance |
ICICI Prudential Fund |
Reliance Nippon Life |
|
|
Eligibility |
1-55 years |
1-55 years |
18-51 years |
|
Maximum sum assured year-wise |
1st Year – 10 times the monthly instalment 2nd Year – 50 times the monthly instalment 3rd Year – 100 times the monthly instalment
In addition the insurance company will pay the investor’s pending Century SIP instalments |
1st Year – 10 times the monthly instalment 2nd Year – 50 times the monthly instalment 3rd Year – 100 times the monthly instalment |
1st Year – 10 times the monthly instalment 2nd Year – 50 times the monthly instalment 3rd Year – 120 times the monthly instalment |
|
Maximum sum assured |
Rs.20 lakh |
Rs.50 lakh |
Rs.21 lakh |
|
Minimum instalment |
Rs.1,000 |
Rs.1,000 |
NA |
|
Discontinuation of cover |
In case of partial or complete redemption/switch out |
||
|
In case investor stops SIP before 3 years |
Cover ceases |
||
|
In case investor stops SIP after 3 years |
Cover continues with certain caveats in terms of sum assured |
||
Amol Joshi of PlanRupee believes that investors can consider these policies. He said, “There is no harm in suggesting these schemes to clients because there is no additional charge for insurance coverage, so even if it does not benefit the investor they would not lose anything.”
However, a few advisors are sceptical. Paresh Shah feels that these schemes do not make sense for clients as AMCs do not provide post sales services on this insurance coverage. He said, “I think this is misleading as the nominee of the investor has to directly approach the insurance company for claim settlement. The AMC does not get involved in the claim settlement process. Also, I have never seen anybody receiving any claims under such schemes.”
Khyati Mashru, Plantrich Consultancy IFA believes that these schemes offer low coverage, which too is only available if the investor stays put. “The coverage is hardly of a few lakh rupees and you do not have flexibility of withdrawing if the fund is not performing well. In case your clients stop the SIP, they will not get the coverage,” she says.
Vishal Dhawan points out that these policies will not benefit investors if they exit mid-way. “Ideally, insurance coverage should not be the reason to remain invested in a mutual fund scheme,” he adds.
