Recently ICICI Prudential Mutual
Fund has launched “SIP insure” in its all equity and balanced schemes. SIP
insure is nothing but life insurance cover given with the monthly SIP
investment. The insurance cover offered is not individual cover but its group
insurance cover in which terms and conditions of insurer will apply while
settling the claim. Reliance was the first to launch such scheme. We also have ULIP
plans which give life insurance cover and also investment options just like
mutual fund schemes. These SIP insure will give insurance cover with investment
option on the same line as ULIP provides. However in SIP insure you do not have
to bear heavy charges like allocation and policy admin charges which are levied
in ULIP.
But before going ahead one need
to understand the broad features of this product and compare it with what is
offered by the Reliance Mutual Fund. The ICICI is better than Reliance as it offers
higher life cover, life cover continues after investment of 3years SIP and
discontinued thereafter. The highlights of the ICICI Pru’s SIP insure are as
under:
§ The
plan is offered to all major individuals whose age at entry is below 46 years
and will continue till age 55 years.
§ Insurance
cover will be available to first/sole unit holder and not to second and third
unit holder.
§ The
minimum SIP amount is Rs. 1,000 per month.
§ The
1st year cover will be 10 times of monthly SIP, 2nd year
it will be 50 times of monthly SIP and 3rd year onwards, life cover
will increases to 100 times of monthly SIP. 100 times means less than 9 times
of yearly SIP. Reliance calculates life cover differently. In case of Reliance
the Amount of life cover available at any time is equal to the aggregate balance
of unpaid instalments. So practically this wants to ensure that the investor at
least get the amount equal to his principle investment planned anytime in case
anything happens to the investor.
§ Maximum
sum assured offered to an individual across all funds is 20 lakhs. Reliance
gives maximum cover of Rs. 10 lakhs sum assured across all funds.
§ Life
cover ceases if SIP for 3 years are not paid. After 3 years of SIP the life
cover will continue but sum assured will come down to value of accumulated
units subject to 100 times of monthly SIP instalment and also subject to maximum
of 20 lakhs.
§ The
Insurance cover will cease in case of redemption or switch out of units whether
partial or full before completion of SIP insure tenure.
§
There is exit load of 2% in case of Reliance for
premature redemption whereas the same is mentioned at 1% in ICICI Pru SIP
insure if redeemed with in 1st year. The exit load of 1% is
applicable even to SIPs without insurance. One needs to check how the charges
of insurance will be recovered. Will it be charged on the basis of insurance
cover provided to each unit holder or will be charged to the scheme.
§ In
case of death of the first/sole holder, the fund value with the sum assured
will be paid to nominee. But in case of Reliance the no money is paid
immediately on the death. Instead the sum assured is added to accumulated
investments under the scheme and
maturity value is paid at the end of tenure opted.
§ In
case of ICICI pru the death claim will not be paid in case of death due to
suicide in the first year of cover. However Reliance has a permanent exclusion
in case of death due to suicide.
§ The
death claim will also be not paid in case of death within 45 days from the
commencement of the SIP instalments except for death due to accident. The said
period is 90 days in Reliance.
§
Death claim has to be submitted to Life
Insurance Company directly and AMC will not entertain any request for claims. Therefore
it is important for you to know who life insurer is.
§ There
is a separate form where in investors have to give additional details required
for life insurance cover. One has to be very careful and it is always advisable
to disclose all the material facts in the form.
As a matter of
principle we strongly advise our clients against mixing investment and
insurance. The major drawbacks in SIP insure is risk cover stops in case of
withdrawal or switch (partial or full). Review of investment performance is
always an integral part of financial planning and should be done once in a
year. You may have to book partial profit to switch to debt or may have to
withdraw your fund for any reason. If risk cover stops in such situations then
it has no meaning. That’s why we advise our client to go for online term plan
for insurance need and keep investment need separately.
Article first appeared at myiris.com on 14th May'2012.
