Your mutual fund has a life insurance cover. Surprised? Read on 👀



May 26, 2021

The current situation has seen a rise in the need and want for insurance.More specifically, a sufficient life insurance cover. While there has been a rise in the purchase of insurance policies, so has the need to save and invest more, and thus the need for SIPs. SIPs in various funds can be financially life-saving - something we cannot stress enough about! But things don’t stop there. Sometimes, your safety net needs an added layer of protection. Perhaps through a life insurance cover.

But what if we told you, your Mutual Fund has already covered that for you?

It might be a good idea to re-look at your Mutual Fund’s terms of service. Several mutual fund houses offer life insurance for those investing in their SIPs - (This is not true for all mutual fund houses).

Some names of the popular ones are:

  1. ICICI Prudential Mutual Fund’s SIP with life insurance cover known as SIP Plus.

  2. Aditya Birla Sun Life has a similar option called Century SIP3.

  3. Nippon India calls it SIP Insure.

How are these different?

These Mutual Funds are basically group insurance policies that are provided free of cost to SIP investors by the fund houses. But there’s more. This is something that’s given as an opt-in plan when you’re selecting the fund. If you’re wondering where to look out for it, it is mostly provided on all equity and hybrid schemes of the fund house. Most fund houses offer SIP insurance to people in the 18-51 age bracket investing in eligible schemes and to make the process even simpler, no health checkups are required as these are group policies. The insurance cover is valid till 55 years of age. So, if you start a 10-year SIP at the age of 51, the insurance cover will be available till you are 55 years of age. This is also extendable till the age of 60 in the case of the Century SIP offered by Aditya Birla Sun Life Mutual fund.

Now, let’s look at the fine print.

There’s a catch here. This insurance cover is only available only in the event that you stick with a SIP for a minimum tenure of three years and if you stop the SIP in between, the cover will cease to exist. In case you also partly redeem the scheme or switch to another one, this Insurance coverage will cease to exist. However, if the SIP is stopped after 3 years, then the cover will continue till the maximum eligible age for coverage.

How is the life cover calculated?

The amount of coverage provided depends on the amount of monthly SIP. For example, in the case of the SIP Plus offered by ICICI Prudential Mutual Fund, the insurance cover is equal to 10 times the SIP amount and increases to 50 times in the second year and goes up to 100 times in the third year. However, most fund houses offer a maximum insurance cover of ₹50 lakh across all schemes. So, if your monthly SIP is ₹1,000 then the insurance cover for the first year will be 10 times at ₹10,000, for the second year it will be equal to ₹50,000 and in the third year, the coverage will go up to ₹1 lakh.

Sounds good, but how do you opt for this?

It’s pretty simple. While filling up the form you simply need to choose the instrument that offers this insurance option. However, in the event of a claim, the nominees will have to approach the insurance company directly.

What does this mean for you?

If it’s on your mind, it might be worth a look! The life insurance cover comes free of cost. So if this was anyway a part of your plan in the first place, this might be a good time to visit those plans and opt-in for a pre-existing cover. But if you’re choosing a fund based on this, you should dig deeper into whether the fund meets your investment objective rather than the insurance plan being the basis of choosing the fund.

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