Systematic Investment Plan With Free Insurance

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Systematic Investment Plan With Free Insurance

Ajit Menon - 28 October 2019

Investing through Systematic Investment Plans (SIPs) is a good way to achieve long-term goals. At the same time, investors should also ensure the dependents are taken care of in case of any unforeseen eventuality. Few Mutual Funds houses provides investment + insurance benefit i.e. Smart SIP facility. The additional benefit of life insurance cover is at no extra cost. The nominee would get the maximum assured amount subject to a limit of Rs 50 Lakh.

Highlights:

 Life insurance cover between 20 and 120 times of the monthly SIP installment or Rs 50 Lakh, whichever is lower
 Minimum SIP Amount: Rs 500 per month and in multiples of Re 1 thereafter
 No waiting period for insurance cover
 ‘Declaration of Good Health’ is not required
 Insurance claim payment to nominee of the investor
 Maximum period of SIP contribution: No upper limit for SIP tenure. The investor can opt for Perpetual SIP also. However, the insurance cover ceases when the investor attains 55 years of age or upon the withdrawal/switch of the SIP investment amount
in part or full, whichever is earlier.

Convenience

 Zero waiting period, get insurance coverage from first SIP allotment
 One Time Mandate for investing
 Auto Debit facility available
 Holding in Demat mode

Eligibility for Life Insurance under SIP:

 Only resident individual investors whose age is 18 years and not more than 51 years at the time of investment
 In case of joint holders, only the first unit holder will be eligible for the insurance cover
 Investor with SIP tenure of less than 3 years will not be eligible for insurance cover
 Existing investor having live SIP and residual tenure of SIP should be 3 years or more as on December 17th, 2018

Life Insurance Cover Illustration:

If an investor does a monthly SIP of Rs 10,000 for 5 years
1st Year - Sum Assured = 20 times monthly SIP installment; 20 X 10, 000 = Rs 2,00,000 (2 Lakh)
2nd Year - Sum Assured = 75 times monthly SIP installment; 75 X 10, 000 = Rs 7,50,000 (7.5 Lakh)
3 rd Year - Sum Assured = 120 times monthly SIP installment; 120 X 10, 000 = Rs 12,00,000 (12 Lakh)
This amount will be paid/credited to the nominee's bank account directly by the insurance company, in the event of the death of the unit holder (subject to the terms and conditions of the Group Term Insurance policy.)

The author is the CEO of PGIM India Mutual Fund