Systematic Investment Plans: At no extra cost, get insurance up to Rs 50 lakh with mutual fund SIP!

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May 06, 2021 10:51 AM

The insurance cover is in the form of term insurance and will be available as a group insurance policy.

Sip free insurance, mutual fund sip with insurance, sip insurance, plan, sip with term insurance plan, SIP insure,SIP insure cover is an additional feature being provided by MF companies to their investors.

​If you are convinced that investing in mutual funds through systematic investment plans (SIPs) can be a good approach to save for the long-term goals, here’s a piece of news that may enhance the benefit. Your SIP in mutual funds may come with free life insurance coverage. Such a benefit of SIP insurance cover is, however, being offered by the mutual fund houses for many years now. If you wish to enhance your life insurance, here is how you can benefit by not only saving for your long-term goals through SIP but also getting life protection.

SIP insure cover is an additional feature being provided by MF companies to their investors. The insurance cover is in the form of Term insurance and will be available as a Group Insurance policy. There will not be any premium to be paid by the investors and the insurance coverage will be free of charge. However, such an insurance cover will be offered only on specific MF schemes being offered by the fund house and will apply only if the investor has opted for a 36-months SIP.

The amount of life cover will keep increasing after the first year. For example, the coverage could be 20 times in the first year, 75 times in the second year, and 120 times from the third year onwards. So, if the monthly SIP amount is Rs 10,000, the coverage will be Rs 2 lakh, Rs 7.5 lakh, and Rs 12 lakh from the 3rd year onwards.

The maximum coverage will be capped and it will vary across fund houses. Some will offer coverage up to Rs 21 lakh while with some others it will be up to Rs 50 lakh across all schemes, plans, and folios taken together. While anyone between 18 and 50 years may avail of the SIP insurance benefit, the coverage ceasing age may be up to 55 or 60 years.

But once you have enrolled for this additional benefit, make sure to continue with the SIP till the term opted. There could be a penalty that you might have to pay. Also, any partial withdrawal, an early exit will cease the coverage for the unitholder.

What to do

There are a few things to keep note of while opting for such free insurance SIP offers.

Firstly, opt for such a facility in those schemes which have performed consistently over the long term and have beaten their benchmark regularly.

Secondly, do not depend entirely on the amount of life cover of such offers. Ideally, one should keep a life cover of at least 10 times of annual take-home income. The SIP insurance amount can only supplement your existing coverage.

Thirdly, you earmark SIP investments for your long-term goals. Even by withdrawing a partial amount to meet your goal, the coverage will cease. Take into account these factors before you decide to go for free SIP insurance plans.

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