1. SIP insurance could be a good option as long as its life cover is not seen as a substitute for a proper term plan, as it's an add-on free group term cover for first unit holder only.
2. In this plan, you get a life term cover merely by having equity MF SIP at no additional cost, as group cover premium is borne by AMCs (currently 3) without impacting fund performance.
3. However, this cover is only a multiple of SIP amount, instead of a multiple of annual income (10-20 times) ideal for protection.
4. Minimum SIP tenure is 36 months, and life cover range is 10 times SIP amount in 1st year, 50 times in 2nd year and 100/120 times from 3rd year onwards.
5. To get a bigger life cover, an investor needs to boost SIPs in these plans, but there’s a cap (25 / 50 lakh max.) after totalling all insurance-linked funds with that AMC.
6. “Entry age” is 18-51, “cover period” is 55/60 years,its “waiting period” is 45 days from SIP commencement, and insurer, not AMC, has to be contacted for claims.
7. Life cover remains valid only if SIPs continue without any break or redemption or switch before completion of SIP tenure, 3 years or more, provided by investor and subsequently renewed.
8. Also, SIP insurance is allowed in select schemes only, and is also not applicable for demat mode of unit holding.
9. Therefore, while free life cover acts as an incentive not to discontinue SIPs during bad times, an investor remains stuck with same funds to keep availing it.
10. However, this cover can be handy for a nominee, on investor’s untimely death, to build his own MF portfolio, by reinvesting claimed amount in new SIPs of his own choice anywhere, to achieve his goals.
11. It can also be handy for an investor without (or inadequate) regular term plan, through these SIP investments, till age of 55/60.
12. Out of the funds on offer, it is paramount to choose only highly rated ones from different AMCs, for ensuring long-term continuity and stable returns, and with asset allocation as per risk profile.
13. A back-of-the-envelope calculation shows that 15 / 20-yr long-term SIPs, initiated by a 40-yr old in SIP Plus funds, up to a total of 50,000 per month, would fetch him a corpus of 2.5 cr / 5 cr at 12%CAGR, along with life cover supplement of 50 lakhs till age of 55 / 60.
2. In this plan, you get a life term cover merely by having equity MF SIP at no additional cost, as group cover premium is borne by AMCs (currently 3) without impacting fund performance.
3. However, this cover is only a multiple of SIP amount, instead of a multiple of annual income (10-20 times) ideal for protection.
4. Minimum SIP tenure is 36 months, and life cover range is 10 times SIP amount in 1st year, 50 times in 2nd year and 100/120 times from 3rd year onwards.
5. To get a bigger life cover, an investor needs to boost SIPs in these plans, but there’s a cap (25 / 50 lakh max.) after totalling all insurance-linked funds with that AMC.
6. “Entry age” is 18-51, “cover period” is 55/60 years,its “waiting period” is 45 days from SIP commencement, and insurer, not AMC, has to be contacted for claims.
7. Life cover remains valid only if SIPs continue without any break or redemption or switch before completion of SIP tenure, 3 years or more, provided by investor and subsequently renewed.
8. Also, SIP insurance is allowed in select schemes only, and is also not applicable for demat mode of unit holding.
9. Therefore, while free life cover acts as an incentive not to discontinue SIPs during bad times, an investor remains stuck with same funds to keep availing it.
10. However, this cover can be handy for a nominee, on investor’s untimely death, to build his own MF portfolio, by reinvesting claimed amount in new SIPs of his own choice anywhere, to achieve his goals.
11. It can also be handy for an investor without (or inadequate) regular term plan, through these SIP investments, till age of 55/60.
12. Out of the funds on offer, it is paramount to choose only highly rated ones from different AMCs, for ensuring long-term continuity and stable returns, and with asset allocation as per risk profile.
13. A back-of-the-envelope calculation shows that 15 / 20-yr long-term SIPs, initiated by a 40-yr old in SIP Plus funds, up to a total of 50,000 per month, would fetch him a corpus of 2.5 cr / 5 cr at 12%CAGR, along with life cover supplement of 50 lakhs till age of 55 / 60.