Mutual fund investors can enjoy benefits of insurance cover at no costs. Many mutual fund houses in India are offering insurance benefits at no additional costs. Individuals who opt for an SIP (Systematic Investment Plan) for wealth creation can simultaneously get the benefits of insurance cover without additional costs. While filling out the SIP investment form, you can opt for mutual fund schemes with insurance cover.
This type of investment gives you a mix of both the opportunity for wealth creation and insurance cover. However, it has certain limitations and terms of usage.
Important Points about Mutual Fund Schemes with Insurance Cover
Mutual fund schemes with insurance covers are available at no cost for investors in the 18-51 age bracket. Here are a few facts that investors need to know about mutual fund schemes that offer insurance coverage.
SIP Tenure
You need to continue your SIP for at least three years to qualify for insurance coverage. If you stop the SIP, or withdraw the investment, or switch before three years, the insurance cover will be terminated. However, if you stop the SIP after a 3-year contribution, the insurance coverage will continue till the investor turns 55 to 60, as defined by the insurer.
Insurance Cover Amount
The cover amount depends on the SIP amount. Typically, mutual funds combined with insurance provide the first year’s coverage that is ten times the SIP amount. It rises to 50 times and 100 times in the second year and third year onwards respectively.
For example, if your SIP amount is Rs. 5000, you can get a cover of Rs. 50,000, which will increase to Rs. 2,50,000 in the second year and Rs. 5 lakh in the third year.
Maximum Insurance Cover
An investor can get a maximum insurance cover of Rs. 50 lakh across all schemes and accounts held by him/ her in a fund house. Some fund houses have capped the limit at Rs. 20 lakh. Such a coverage amount is very less when compared with traditional insurance schemes in the market. Death from pre-existing illnesses is not covered under this scheme.
Premature Withdrawal
If you choose to withdraw the investment ahead of the SIP tenure, an exit load of 2% will be applicable. In addition, this will lead to termination of insurance cover. If the investor passes away and the nominee redeems the fund units, an exit load will be charged.
NRIs willing to invest in mutual funds in India must consult market experts to make informed decisions. You can get detailed mutual fund advisory from experts at SBNRI. You can download SBNRI App from the Google Play Store or App Store to ask any questions related to mutual fund investment, NRI account opening online and tax filing in India. To ask any questions related to Mutual Funds, click on the button below. Also visit our blog and YouTube channel for more details.
FAQs
Many mutual fund houses have added insurance benefits at no cost in their schemes to tap into its popularity. It attracts investors for the long term. Mutual fund houses offer insurance along with systematic investment plans (SIP). The cover amount typically depends on the SIP amount and its tenure.
There are mutual fund companies like ICICI Prudential Mutual Fund, Reliance Mutual Fund, and Aditya Birla Mutual Fund that offer insurance cover with mutual fund schemes when customers invest through Systematic Investment Plan (SIP) route.
It depends on the policy of the mutual fund house where you invest in a mutual fund scheme. There are several mutual fund houses that render free term insurance cover to individuals investing in SIPs.
The cover amount depends on the SIP amount. Typically, mutual funds combined with insurance provide the first year’s coverage that is ten times the SIP amount and rises to 50 times and 100 times in the second year and third year onwards respectively.
