Some mutual fund plans provide insurance benefits with no premium cost through mutual fund SIPs. Many big fund institutions have begun to combine insurance and mutual funds into a single program. Investors who invest in a mutual fund through a SIP receive life insurance coverage. These offer free group insurance plans as they don’t charge any premium costs.
How does it work?
Investing in mutual funds with insurance is an excellent method to generate money while protecting yourself with life insurance. These schemes are also often known as SIP plus. The insurance coverage increases in the first, second, and third years, and the coverage is most critically dependent on the systematic investment plan amount.
Insurance coverage starts at 10 times the SIP in the first year, rises to 50 times the SIP in the second, and reaches 50x in the third year, depending on the mutual fund. Some mutual funds, however, provide maximum insurance of up to Rs. 25 lakh. You need not pay an insurance premium to participate in these mutual fund schemes with life insurance. You must therefore find out what your maximum insurance coverage is before beginning your SIP.
You must continue your SIP for at least three years; however, if you need the money sooner and withdraw it, your life insurance coverage will lapse, and you will be penalised by paying a 2% exit load. You will be penalised 2% of NAV if you make a partial or complete withdrawal within a year. Here are the eligibility criteria for mutual funds with life insurance:
- You should be between the ages of 18 and 51.
- Since the program is open to everyone, Indian citizens and non-citizens are eligible for mutual fund insurance.
- You will not be qualified if you stop your SIP before the full three years. Therefore, you should continue your SIP for at least three years.
- You must choose a SIP while participating in your mutual fund scheme to receive insurance coverage advantages.
- The insurance will continue until an investor becomes 55 years, at which point it will expire. To protect yourself, you should not rely entirely on mutual fund insurance.
If you choose a life insurance plan, your SIP payments will still be made as scheduled, even in the event of your passing. The insurance company receives payment for the premium, and the nominee gets payment for the maturity amount. In some circumstances, the nominee can keep the maturity value in their bank account or borrow against it in the future.