Reliance SIP Insure, ICICI Prudential SIP Insure, Birla Sun Life Century SIP: what is everybody talking about? These are systematic investment plans (SIP) that have an insurance element to it. You put in money on a regular basis for investment in equities, and given the insurance factor attached to it, you are not likely take the money off the table quickly, making way for long term investments. But this investment is for equity only. And the insurance is only a term cover, which gives a sum assured to the nominee in the event of the investor's death.
So will these instruments work for you? Well, at least the positive is that there is no extra fee for the insurance right now. So one pays the usual asset management charges. But there are exit loads which means if one withdraws prematurely, there are penalty charges.
The typical annual premium of such an SIP, Mint writes, for a 30-year-old for a term cover of Rs. 10 lakh over 25 years is about Rs 1,300-1,500. But asset management companies with really deep pockets will be able to give insurance for free with an SIP.
What are the flipsides? One, the insurance cover is not an optimal one as Reliance's SIP is subject to maximum cover of Rs 10 lakh which might not be enough for the insurance needed.
Second, the claim for insurance is settled with a separate department and not with the asset management arm. The AMC can only guide you to the insurer, but can't ensure payment of the claim.
For details on the SIP-cum-Insurance products, read the Mint article here.
First Published On : May 22, 2012 13:21 IST