The idea of getting the benefits of both mutual fund and insurance in one product interested almost everyone and in no time AMCs introduced SIP with insurance. DSIJ explains what is SIP with insurance and is it worth investing in?
People have still not got over the reintroduction of LTCG (Long Term Capital Gains) tax on equity and equity-oriented mutual funds. ULIPs (Unit Linked Insurance Plans), which were spared from any tax, are being sold by insurance companies and agents, which highlights the tax benefits of ULIPs over mutual funds. However, there are some AMCs (Asset Management Companies) that have started giving term insurance cover on select mutual funds. The cover is directly proportional to the monthly SIP investments made by the investor. This insurance cover is technically free. You do not have to pay any additional premium to avail this facility. The premium for such insurance cover is funded by AMCs. Let us dive deep to understand the product and whether or not you should opt for such product.
What does SIP with insurance cover mean?
Some of the AMCs have started providing term life insurance cover to investors who are investing through SIPs. They do come with certain terms and conditions, such as the insurance being a group insurance cover and not an individual cover and the tenure of the SIP must be at least 36 months and it is only available on investment in select mutual funds. The cover starts after a waiting period of 45 days, except for accidental death. There is also age criteria applicable to this feature. Investors who are aged above 18 years, but not more than 51 years at the time of first investment would be eligible for the insurance cover. Once the investor attains the the maximum age as prescribed by the fund house, the cover automatically ceases to exist.
How does it work?
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