Monday, August 04, 2008

Get upto 45 Lakhs of Free Insurance

Oflate we have seen mutual fund houses offerering free life insurance cover. The following are some fund houses which offer life insurance cover.

  1. Reliance Mutual Fund ( SIP + INSURE)
  2. Birla Sunlife Mutual Fund ( CENTURY SIP )
  3. Kotak Mutual Fund ( STAR KID )
  4. DWS Mutual Fund
Let us take a closer look at the schemes offered by each of these fund houses

Reliance SIP + INSURE
SIP Insure is an add on feature of life insurance cover to individual investors opting for SIP in the designated schemes. In the unfortunate event of the demise of an investor during the tenure of the SIP, an amount equivalent to two times the targeted SIP contribution will be paid to the nominee. (i.e. Number of SIP Instalments enrolled for X Amount of SIP Installment X 2, subject to a maximum of Rs.10 lakhs per investor)

Example: An investor does a monthly SIP of Rs.2,000 for 15 years in Reliance Growth Fund. If he dies after a period of 3 yrs, then his Sum Assured = Number of SIP Instalments enrolled for X Amount of SIP Installment X 2 = 180 X 2,000 X 2 = Rs.7,20,000 (360 times your SIP amount (or) 30 times your yearly sip amount).

What is the catch? There are no additional charges. But there is an exit load of 2% if you withdraw your funds before completion of the specified term. If you stay invested for the complete term, you donot have to pay any exit load. Your life insurance cover ceases if you stop SIP or make withdrawals.

My Verdict : Reliance SIP + Insure is a very good product. This should be part of every disciplined investor's portfolio. One can get free insurance cover of upto 360 times your SIP amount. To get a cover of 10 Lakhs one should start a monthly SIP of Rs.2,800 for 15 years.

Birla Sunlife CENTURY SIP
Century SIP is an add on feature of life insurance cover to individual investors opting for SIP in the designated schemes. In the unfortunate event of the demise of an investor during the tenure of the SIP, the nominee gets Insurance Cover equivalent upto 100 times monthly SIP installments. (i.e. Amount of SIP Installment X 100, subject to a maximum of Rs.20 lakhs per investor)

Example: An investor does a monthly SIP of Rs.5,000 for 10 years in Birla Sunlife Frontline Equity Fund. If he dies after a period of 3 yrs, then his Sum Assured = Amount of SIP Installment X 100 = 5000 X 100 = Rs.5,00,000

What is the catch? There are no additional charges. But there is an exit load of 2% if you withdraw your funds within 3 years of starting SIP. If you stay invested for longer than 3 years, you donot pay any exit load. Your life insurance cover ceases if you stop SIP before completion of 3 years or make withdrawals.

My Verdict : Birla Sunlife CENTURY SIP is a very good product. This should also be part of every disciplined investor's portfolio. One can get free insurance cover of upto 100 times your SIP amount. To get a cover of 20 Lakhs one should start a monthly SIP of Rs.20,000.

Kotak STAR KID Facility
Star Kid SIP facility is an add on feature of life insurance cover to individual investors opting for SIP in the designated schemes. In the unfortunate event of the demise of an investor during the tenure of the SIP, the nominee gets Insurance Cover equal to cumulative unpaid SIPs from the date of death till the completion of the term chosen (i.e. Amount of SIP Installment X Balance SIP installments) subject to a maximum of Rs.10 lakhs per investor without medical tests. With medical tests an investor is eligible for insurance cover upto Rs.1 Crore. The nominee can only be your kid and not anyone else.

Example: An investor does a monthly SIP of Rs.5,000 for 15 years in Kotak Opportunities Fund. If he dies after a period of 2 yrs, then his Sum Assured = Amount of SIP Installment X Balance SIP installments = 5000 X 13 X 12 = Rs.7,80,000

What is the catch? The are no additional charges. But there is an exit load of 2% if you withdraw your funds within 5 years. If you stay invested for 5 years, you donot pay any exit load. Your life insurance cover ceases if you stop SIP or make withdrawals. Insurance cover is only upto the age of 50 years.

My Verdict : Kotak Star Kid SIP facility is a good product. The biggest advantage is one can get free insurance cover of upto Rs.1 Crore with medical tests. To get a cover of 1 Crore, one should start an SIP of Rs.44,000 for 20 years and undergo medical tests. To get a cover of 10 Lakhs, one should start an SIP of Rs.4,400 for 20 years.

DWS Tax Saving Fund
DWS Mutual Fund offers free insurance to individual investors investing in DWS Tax Saving Scheme. In the unfortunate event of the demise of an investor an amount equivalent to five times the invested amount will be paid to the nominee. (i.e. Amount Invested X 5, subject to a maximum of Rs.5 lakhs per investor)

Example: An investor does a one time investment of Rs.50,000 in DWS Tax Saving Fund. If he dies after a period of 3 yrs, then his Sum Assured = Amount Invested X 5 = 50000 X 5 = Rs.2,50,000

What is the catch? There are no additional charges. Life insurance cover ceases if you make withdrawals.

My Verdict : This is an excellent product. This product suites both one time investors and disciplined investors. One will need to invest Rs.1,00,000 to get a cover of 5 Lakhs. Since this is an ELSS scheme, it qualifies for deductions of upto Rs.1,00,000 under Section 80C, which is an added tax saving benefit.

CONCLUSION
You can get upto 45 Lakhs of free insurance without any medical tests(10 Lakhs from Reliance MF, 20 Lakhs from Birla Sunlife MF, 10 Lakhs from Kotak MF, 5 Lakhs from DWS MF). One should plan your investments well to extract the maximum benefit from these products.

17 comments:

Life Insurance Canada said...

Nice article - it shows, how accessible life insurance is anywhere in the world. I am selling life insurance in Canada and it's inevitable to cooperate with other financial sector to survive on the market. Results for offered free insurance policies in your test were good, however, it's not always like that (at least here in Canada). Insurance policies bounded with some other product are often not well tailored for clients, so I believe traditional brokers will not "die out" so soon...
Lorne

Sharesher said...

Dear vvrk,
Congratulations for writing such a wonderful article. Yes, Free Insurance Plans from Mutual funds would go a long way in correcting the investor's mind vis a vis Insurance and Mutual Funds.

There are some mistakes in your message. Obviously, you are a ULIP agent, so it could be that you are not that deeply into Mutual funds.

Quote 'Example: An investor does a monthly SIP of Rs.5,000 for 10 years in Birla Sunlife Frontline Equity Fund. If he dies after a period of 3 yrs, then his Sum Assured = Amount of SIP Installment X 100 = 5000 X 100 = Rs.5,00,000' UnQuote.

In the above example, that you have taken, you are wrong, that the investor will get 5,00,000 because the fine print of the Birla Century SIP says, the investor will be paid, amount invested or the market value, which ever is high. So, if in the above example, the investor has paid Rs.5000 x 36 months, he has paid, Rs.1,80,000. So, here he will get an insurance amount of 1,80,000 or the fund value which ever is more as insurance amount apart from the fund value.
So, suppose, in the above example the investor's investment has gone upto say Rs.1.5lakhs, then the investor will get Rs.1.5Lakhs, then obviously, the investor will get Rs.1.5 lakhs (which is the fund value) plus Rs.1.8 lakhs( the amount he has invested till now). So, he will get totally Rs.1.5 + Rs.1.8, totalling Rs.3.3 Lakhs, and not Rs.5 Lakhs as mentioned by you.

Correct me if am wrong.
Visit my blog goodfundadvisor.blogspot.com
BEst of luck,
Regards,
Srikanth

Raj Gopal Vuppala said...

Dear Srikanth,
Thank you for your comments. Regarding myself, I am neither an Insurance nor a Mutual Fund Agent(YET). I am a IT Professional. I have been in the US for eight years before I returned to India in 2003. Financial planning is like a hobby for me. I spend time acquiring knowledge and reading when I have the time. Out of pure interest I did pass my AMFI exam more than a year back but I have not yet applied for an ARN number. Last year work suddenly got very busy and I had to vist the US. I was asked to give a lecture about financial planning in my company about three weeks back. Ever since I have renewed interest in this area. Infact, now I am planning to apply for my ARN Number with AMFI.

Regarding the source, I got the information about Century SIP from Birla Sunlife Mutual Fund website. I have downloaded the offcial PDF released by them about Century SIP. The information I posted is accurate per the information in Birla Sunlife Mutual Fund website. But a pair of eyes is always better than one, so I would like to request to review your source again.

Thanks,
Raj

Anonymous said...

Can you please go thru'

http://onlinemutualfund.wordpress.com/2008/07/21/why-not-to-invest-in-reliance-sipinsure-plan/

and clarify if the statement "The Sum Assured, in case of death is not paid to the nominee, but shall go back to the scheme of the AMC(Reliance Asset Management Company)." is true.

thanks
rakesh.

Sharesher said...

See my comment in the same website. That's why go for either Birla or DWS both of which offer Free Life Insurance without the accompnying annoying conditions imposed by Reliance.
Or better still visit my blog goodfundadvisor.blogspot.com for more details

Raj Gopal Vuppala said...

Dear Rakesh,
The Sum Assured incase of death will be invested in the nominee's name in the same scheme. The nominee can withdraw these funds by paying an exit load of 2% or at the end of the term without paying any exit load.

Example: If the insured started an SIP of Rs.3000 in Reliance Growth, incase of death, the Sum Assured (or) insurance amount received will be invested in the same scheme that is "Reliance Growth" in the nominee's name. The nominees fund balance = Value of investments made by insured + Sum Assured received. He can withdraw this amount by paying a exit load of 2%

Hope this clarifies your doubt.

Thanks,
Raj

ONLINE MUTUALFUND said...

@RGV,

Nice and neat layout of blog.

OnlineMF

ONLINE MUTUALFUND said...

@rakesh,

The Statement"and clarify if the statement "The Sum Assured, in case of death is not paid to the nominee, but shall go back to the scheme of the AMC(Reliance Asset Management Company)." is true."
-
The reason person opts for insurance in first place is that financial assistance is provided to the dependents/nominee on the demise of the applicant.
The SIP+insure instead of paying to the nominee of the person deseased, fills up its own kitty by putting back the amount to the scheme itself.

Buysell said...

For Birla Sunlife Century SIP, Benefits to Nominee (in case of pre
mature death)= Fund Value + Life Cover equivalent upto
100 times SIP installments.

I have this done with me & I have the brochure with me. If anyone wants it I can send it across. I think all such free insurance from MFs has stopped from 31st Oct 08

Anonymous said...

HI Can you provide me document that support your statement that all this mf+insurance are going close form 30 October..Mail me contacttohimanshu@yahoo.com


Himanshu Patel

Raj Gopal Vuppala said...

The decision to stop providing insurance with mf's was taken by Life Insurance Council. But since they do not have any regulatory or legal authority, it got canceled I believe by SEBI or AMFI.

Nevertheless you might want to check with each of the fund houses which are offering free insurance. The latest news I have is the Birla Century SIP is coming to an end in the middle of december 08.

Sushil Girdher said...

There has been a mess in the markets lately and the stock markets have been giving a negative return from the beginning of this financial year. People who have invested in the markets through Unit linked (ULIP’s) have been the worst hit.

What are the options the investor has if he has a Unit Linked Insurance Policy ?

Well as you may be aware and I suppose that you were told by your investment advisor that Ulip’s are investment for a longer period , the best option is to stay invested. If you even thing of withdrawing your money at this point of time you will have to bear a huge loss. The structure of Unit Linked policy is such that it takes at least 3 years to actually cover the expenses paid by you and another 3 years to give you some better return, provided that the markets are favorable.nonst

Sharesher said...

You are bang on Target Sushil. That is why I am always against ULIPs. Instead go for Pure Term Insurance Plans and balance invest in Good diversified Mutual funds.
People still have their inhibitions about Mutual funds, unless that is eradicated, ULIPs will continue to Fool investors.
visit my blog goodfundadvisor.blogspot.com for more
Best of luck,
Srikanth shankar Matrubai
Bangalore

Anonymous said...

I totally agree with MFs being better option than ULIPs. ULIPs guise various things in lots of fine prints. Don't buy any plan either MF or ULIP with insurance/risk cover attached even if they claim is "free", there is nothing that is free. Keep risk cover with pure term insurance as premiums are really small and can be sustained at any time (25 lakh coverage should be available for rs 6000-9000/pa for 25 yrs to 36 yrs). If you try to mix it with investments, if you can't sustain high premiums in future, you will run into risk of losing life risk cover.

Today I visited ICICI for a top-up and they tried to sell a new policy which they claimed that would allocate 100% premium with 120% guaranteed first year premium addition! I wrote the check, signed the paper and then relooked at the charges - first year premimum will not be invested, is treated as charge!

Kotak showed a plan with no premimum allocation charges. But when I looked at the "Other"/"Admin" charges, it is 3% of annual premium, quoted in monthly rate of 0.25% of annual premimum.

Aviva tried to sell a product where they would not only guarantee sum insured but pay future investment premimums as well in case of insured's death. When I questioned about the high premium allocation charges, they told it is to cover for future premiums. However there was separate annual risk cover charge for the future premium payments in addition to usual mortality charge!

Don't just believe the "products" from insurance companies, IRDA is sleeping while SEBI has made mutual funds more transparent and less convoluted.

Keep life simple, you need pure insurance to cover your life, health, property. Keep insurance separate from all investment options!

James Morgan - Puritan Financial Advisor said...

DWS Mutual Fund offers free insurance to individual investors investing in DWS Tax Saving Scheme. In the unfortunate event of the demise of an investor an amount equivalent to five times the invested amount will be paid to the nominee.

Srikanth said...

DWS has now reduced the Free Insurance Coverage from 5 times to just 2 times. Please keep this in mind while investing.
Visit my blog http://goodfundsadvisor.blogspot.com for more detailed mutual fund analysis and recommendations.
Regards,
Srikanth Matrubai

Aditya chandak said...

Nice article, you made it easy for me to understand the insurance term in investment plan. thanks for the information.