A few mutual fund houses are offering free optional in-built insurance cover to their SIP investors based on their SIP contributions and tenure. The cost of insurance is borne by the fund house. The objective is to encourage their SIP investors to continue their SIP contributions as well as stay invested for the long term. The add-on life cover would help investors in achieving their crucial financial goals in the event of the unfortunate death of the investor. The insurance cover usually starts with the commencement of the SIP without any requirement for medical tests.
Eligibility criterion of SIP plus Insurance products
Individual investors aged between 18 to 51 years at the time of investment are eligible for the SIP plus insurance scheme. In case of multiple holders, only the first holder will be eligible for the insurance cover.
Life cover provided by the SIP plus Insurance bundled products
| Name of SIP plus Life Cover product | Amount of life Cover (in terms of monthly SIP multiples) | Maximum Life Cover (Rs) | ||
| 1st year | 2nd year | 3rd year onwards | ||
| ICICI Prudential SIP Plus | 10 times | 50 times | 100 times | 50 lakh |
| Aditya Birla Sun Life Century SIP | 10 times | 50 times | 100 times | 50 lakh |
| Nippon India SIP Insure | 10 times | 50 times | 120 times | 50 lakhs |
SIP tenure requirements
The fund houses have placed different terms and conditions regarding the minimum and maximum tenure for availing the SIP plus Insurance bundled product.
ICICI Prudential AMC
- Minimum tenure: 3 years
- Maximum tenure: 100 years minus the current age of the investor or till the predefined age of the investor.
- The insurance cover is valid till the investor completes 55 years of age. The investor will continue
Aditya Birla Sun Life AMC
- Tenure: 60 minus the current age of the investor.
- Those opting for longer SIP tenures can continue with their SIP contribution without getting any insurance cover after the completion of their 60 years of age.
Nippon India AMC
- Minimum tenure: 3 years and in multiples of 1 month
- Maximum tenure: No limit
- However, the add-on life cover will cease on the completion of SIP Insure tenure or the completion of 55 years of age by the investor, whichever is earlier.
Actions by the investor leading to the cessation of life cover:
Nippon India AMC
- Discontinuation of SIP before the completion of 36 SIP instalments.
- Partial or full redemption of the units purchased or switching out to other MF schemes before the completion of mandated SIP tenure or before completing the age of 55 years, whichever is earlier. However, the condition related the switch out is not applicable for investors switching from Nippon India Retirement Fund -Income Generation Scheme to Nippon India Retirement Fund – Wealth Creation Scheme to or vice a versa.
- Default in SIP payments for 3 consecutive months or 5 different occasions of SIP defaults during the mandated SIP tenure or before completing 55 years of age by the investor, whichever is earlier.
Aditya Birla Sun Life AMC
- Discontinuation of SIP before the completion of 3 years of its commencement.
- Full or partial redemption/switchouts of the units purchased before the completion of the mandated SIP tenure.
ICICI Prudential AMC
- Discontinuation of SIP before the completion of 3 years.
- Full or partial redemption/switch out of units purchased before the completion of the mandated SIP tenure.
- Default in SIP contribution for 5 consecutive months.
Exclusions for Insurance Cover:
Aditya Birla AMC
- Death within 45 days from the SIP commencement except for death due to accident
- Death due to suicide within the 1st year of the SIP commencement.
- Death due to pre-existing illnesses or diseases
ICICI Prudential AMC
- Death due to suicide within the 1st year of the SIP commencement.
- Death within 45 days of the SIP commencement except for death due to accident.
Nippon India AMC
- Death due to suicide within the 1st year of the SIP commencement.
Is it Worth Investing in SIP with Insurance Scheme?
The primary objective of investing in mutual funds is to achieve one’s financial goals and create wealth as per his investment horizon, risk appetite and asset allocation strategy. Hence, one should invest in the mutual fund schemes offering free life cover only if they have an excellent track record of beating their benchmarks and peer funds in the past and have enough potential to continue to do so in the future.
If the mutual fund(s) offering the free life cover satisfies all the crucial fund selection parameters, then the investor should make sure to opt for the add-on life covers. Doing that will enhance their total life cover at no extra cost. However, investors should continue to review the performance of these funds at periodic intervals. The availability of free life cover should never influence the decision to invest in or redeem these funds.
Investors should also adequately enhance their life covers through regular term insurance plans at periodic intervals without factoring in the free life cover provided by the bundled MF plus insurance products.
