What do if your favorite South Indian shop stops giving you the coconut chattni? What if the Pani Poori wala stops giving the extra spicy-water? You will never like it. The freebies that you get is an essential part of the experience. That is human nature and we all like what is free or without cost. Using the same human attributes, many mutual funds have started offering “Free Insurance”. This is generally with SIPs – called as SIP with Insurance.
SIP with Insurance is a bundled product, where along with the investment units, you get a bit of insurance. I am saying it “bit” because it is not substantial enough that it can replace your term plan. How? Let’s see the details today.
This post will help you know the features, details & decide on SIP with Insurance. So let’s start.
The 3 top most MF companies that started SIP with Insurance
- Aditya Birla MF – Century SIP
- ICICI Prudential MF – SIP Plus
- Reliance Nippon MF – SIP Insure
Let’s review each of these SIP with Insurance Features
Aditya Birla MF’s Century SIP
In this scheme, they offer free insurance based on your SIP period & Amount of SIP. Your insurance cost is fully borne by AMC. You don’t need any medical check-up or any proof. You just need to sign a good health declaration and answer Some questions.
Cover under Century SIP:
1st year of investment: – you will get 10 times of your monthly SIP
2nd year of investment: – you will get 50 times of your monthly SIP
3rd year of investment: – you will get 100 times of your monthly SIP
The maximum limit of every insurance is 20 lakhs.
For example, if you invest Rs 1000 per month in an equity fund, you will get Rs 10000/- insurance in Ist year, Rs 50000 in 2nd year and after it, during the 3rd year & ONWARDS you will be insured with Rs 100000.
If you invest Rs 30000 per month your insurance for Ist year will be 3 Lakhs. For 2nd year it will be 15 Lakhs after your 3rd year you will get insurance of 20 Lakhs (Max Limit).
Entry age limit for this plan is 18 to 46 years and the plan covers up to the age of 55 years.
Insurance cover starts your day of first investment, however, for first 45 days, only accidental death is covered.
What if SIP discontinues?
If the SIP is discontinued after 3 years, the cover continues till the age of 55.
The designated schemes under Century SIP include almost all the top performing equity funds of Aditya Birla Sun Life Mutual Fund.
ICICI Prudential MF’s SIP plus
SIP Plus provides the same amount of cover free of cost, as offered by Century SIP.
The only difference in the product is the Maximum Life Cover is Rs 50 Lakhs.
Age of entry is 18 to 51 years. Insurance cover ceases to exist after 55 years of age.
All the main equity funds are covered in SIP plus.
Reliance Nippon MF’s SIP Insure
This scheme also follows all same conditions with the difference that after 3rd year the SIP cover is 120 times of your monthly investment.
Another difference is the maximum cover is Rs 21 Lakhs only. (Update Aug 2018 – MAX COVER INCREASED TO Rs 50 Lakhs)
Comparison of Plans – SIP with Insurance
So in a nutshell, here is how these 3 plans stand opposite each other:
| Feature | Aditya Birla Century SIP | Reliance SIP Insure | ICICI Prudential SIP plus |
| Age limit | Investor must be in the age of 18 – 46 years | Age between 18 – 51 years | Investor with age range 18 – 51 years. |
| Insurance Cover 3rd Year onward | 100 times of monthly investment | 120 times of monthly investment | 100 times of monthly investment |
| Maximum Insurance Cover (Rs) | 20 Lakhs | 21 Lakhs (Update Aug 2018 – MAX COVER INCREASED TO Rs 50 Lakhs) | 50 Lakhs |
Should you opt for SIP with Insurance Plans?
Investments and Insurance are 2 separate pillars of your financial plan building. You cannot mix them.
The SIP amount or scheme should be independent of free insurance. If you get it it’s fine otherwise no issues.
The attraction with SIP with insurance is that you get the cover free of cost. If the cover is offered with schemes that have a solid track record of performance across market cycles and fit your plan, you can go for it.
Your major goals should be covered through a term plan only. This is because you need a full-time insurance and not an insurance cover which is not flexible or can stop when your SIP stops for any reason.
However if you in 40-50 range and have missed out term plans, these plans will be handy as term plans in this age will costly.
Hope you are now conversant with the SIP with insurance plans of Mutual Funds.
Do share your views below.
This article has contributions from Ms Payal Patwari – Intern Research
