SIP + Insure

 SIP + Insure

Hello Friends,

Today we will talk about the attractive feature of Insurance along with the Systematic Investment Plan (SIP). Please share your views in the comment box.

Some Mutual Funds offer Insurance cover at no extra cost. This is to motivate the investors to stay invested for a long period and get the life covered as well. This additional feature of Insurance does not attract any cost to the pocket of investor as the cost for this insurance facility is borne by the Mutual Funds.

Any investor who is between the age of 18 and 51 can avail this facility. If the investment in Mutual Funds has been by joint holders, then this facility is applicable to the first holder of that particular investment. There are certain Asset Management Companies (AMCs) which offer this facility to their customers, to name few 

Axis Mutual Funds, 

ICICI Prudential Mutual Funds,  

Nippon India Mutual Funds

Aditya Birla Sunlife Mutual Funds

PGIM India Mutual Funds

These AMCs provide their customers with the facility of SIP + Insurance and many new names may get  added in the list in coming days. There are some common rules for this facility which have been mentioned below

1] Some companies provide this life insurance cover up to the age of 60 of the clients and some companies provide it up to age of 55. If SIP is continued after this age, the insurance cover will be stopped automatically

2] In the first year of SIP, the life insurance cover will be of 10 times of the SIP Installment

3] In the second year of  SIP, the life insurance cover will be of 50 times of the SIP Installment

4] In the third year of SIP, the life insurance cover will be of 100 or 120 times of the SIP Installment

5] One can get maximum life insurance cover up to Rs. 50,00,000/-

6] If one stops the SIP installment, the life insurance cover will be stopped too

7] Back to back SIP dishonored of SIP installments ( 3 times) attracts ceasing of Life insurance cover.

8] AMCs can decline the Insurance claims if the death of investor occurs within the first 45 days other than the accidental death. Claims can be repudiated if investor dies committing suicide,  If investor dies due to pre-existing illness then claim can be denied.

Let us understand the calculations of life cover as per the following scenarios

Let's assume that Mr. A has taken SIP + Insure of Nippon India Mutual Funds and his SIP amount is of Rs. 1,000/-

 In the first year, he will get a life cover of 1000 X 10 = 10,000/- Rs

In the second year, he will get a life cover of 1000 X 50 = 50,000 Rs.

In the third year and onwards, he will get a life cover of 1000 X 120 = 1.20 Lakhs 

It is always good to have insurance facility, however one should always check the performance of Mutual Funds' schemes. To ensure continuous Insurance coverage one should not let the SIP installment get dishonored. One should not rely only on this facility for Insurance coverage, Term Insurance has to be given with the first priority. 

This option of SIP + Insure will not start automatically, for this one has to select this option while filling the form. Investors should not take a look at Insurance, he or she should think for risk involved in that particular fund.

With this option to get Insurance, We recommend our readers to take SIP + Insure, however before deciding something always consult your Financial Planner. Wish you all the best. 

Please feel free to share your views in the comment box or let us know your requirements to have more knowledge of a particular topic for upcoming posts. Thank you.

With regards

Sunil Patil

I for Investment Financial Consultancy, Pune