Systematic Investment Plan

What are the Mutual funds with Insurance Cover?


With Assets Under Management (AUM) of ₹ 30,50,130 crore as on January 31st, 2021, the Indian Mutual fund Industry has grown almost 4.5 times within a span of 10 years. This shows the increased demand for mutual fund products in recent years. As on January 31st, 2011 Indian Mutual fund Industry was having an AUM of ₹ 6.91 trillion. Mutual funds are an excellent avenue for accumulating wealth with minimal risks over a period. This becomes even more attractive to customers when they get free cover of insurance with chosen mutual fund schemes. The not so good year 2020 has left the populace in shocks when the nation was gripped by the deadly Covid-19 pandemic. More people have started to buy health insurances schemes to cover themselves from any such diseases. Mutual funds with insurance cover are a group product of mutual funds which are currently offered by three Asset Management companies in India. In this article, we will understand the salient features of Mutual funds with Insurance cover.

What are mutual funds with Insurance cover?

The insurance safety net is provided along with mutual fund schemes by few Asset Management Companies (AMCs) when an investor invests through Systematic Investment Plan (SIPs) route. This concept is not matured in India but gaining the attention of many investors for the past 1 year. This is a good scheme where investors get insurance cover free of costs by investing in select mutual fund schemes that offer this facility. Investors who are in the age bracket of 18 years to 51 years can opt for this scheme.

Why do AMCs offer this kind of insurance cover with Mutual fund schemes?

Nippon India Mutual Fund, ICICI Prudential Mutual Fund, and Birla Sun Life Mutual Fund had launched this add-on benefit of life insurance cover for investors in year 2018. These schemes were launched with the objective of enhancing investing experience of investors. AMCs wanted to inculcate the financial discipline in investors who are seeking to achieve long term financial goals. Providing life insurance cover to investors is like a reward for being consistent in investing. AMCs bear all the costs of premiums.

How does this scheme work?

To take the benefits of life insurance with selected mutual fund schemes, investors should register SIP for a minimum period of 3 years. The provisions for three years are as follows:

1st year: The cover is 10 times the monthly SIP instalments

2nd year: The cover is 50 times of the monthly SIP installments

3rd year: The cover is 100 times of the monthly SIP installments

These are the maximum caps for insurance cover offered by the Asset Management Companies. The below table explains how this cover works for 3 years.

Mutual Fund SchemeLife CoverMaximum Life Cover (in ₹) *Life Cover till age (In Years)
In 1st YearIn 2nd YearIn 3rd Year
Aditya Birla Sun Life Century SIP10 times50 times100 times25 Lakhs60
ICICI Prudential SIP Plus10 times50 times100 times50 Lakhs55
Nippon India SIP Insure10 times50 times100 times50 Lakhs55

* Maximum life cover is total of all existing investments in SIP linked insurance schemes with AMCs.

Let us understand with a monthly SIP of ₹ 10,000 in the below mentioned AMCs:

Mutual Fund SchemeLife Cover
In 1st YearIn 2nd YearFrom 3rd Year onwards
Aditya Birla Sun Life Century SIP₹ 100,000₹ 500,000₹ 1,000,000
ICICI Prudential SIP Plus₹ 100,000₹ 500,000₹ 1,000,000
Nippon India SIP Insure₹ 100,000₹ 500,000₹ 1,000,000

In case of withdrawal by the investors before maturity

If an investor withdraws before the 3 years then the insurance cover and SIP will stop then and there since SIPs are directly proportional to insurance cover.

On the other side, when investor withdraws after 3 years then he is liable to get insurance cover which is equal to SIP units allotted on the first business day of the month in which renewal confirmation is given.

What are the features of Mutual fund schemes with insurance cover?

Group Insurance

Mutual fund schemes with insurance cover offer insurance on group basis which means that all scheme holders are insured as a group by this life cover.


This add-on feature is availed by SIP investors. This benefit is not for lump sum investors.

Free of costs

These schemes are free of costs as all the premiums are financed by the Asset Management Companies. Investors do not have to bear any insurance expenses directly or indirectly.

Nominee(s) get the benefits

In case of sudden demise of the investor, the proceeds are given to the nominee(s) if the investor has registered the SIPs for a minimum period of 3 years and did not discontinue the SIP or redeemed the amount within the period.

Quantum of insurance differs

The amount of maximum cover differs from AMC to AMC. Fund house like Aditya Birla will provide life cover up to 100 times of monthly SIP contribution by the investor. On the other hand, Nippon India Mutual Fund will take the insurance proceeds to complete an investor’s SIP tenure on the behalf of the investor.

Selectively offered

Not all mutual fund schemes offer the life insurance cover as an-add on benefits. Investors should confirm with their respective AMCs for mutual funds with life cover.

What are the things investors should keep mind before selecting a mutual fund with insurance cover?

Sole dependence

Investors, often, solely rely on add on cover with mutual fund scheme which is not a prudent decision. Investors should understand the thin line that life cover is just one feature of the whole scheme and that is proportional to the SIPs made by them. This insurance will cease to exist whenever an investor turns 55, hence any insurance cover which ends before your retirement is not an ideal cover.

Exit load

Redemption before maturity will attract the exit load of 2% on the value of an investor’s redemptions. This exit load is used by AMCs in funding the group insurance cover for investors.


When an investor chooses a specific mutual fund scheme solely on insurance cover then that decision is a sub optimal decision. Fund’s track record, manager’s consistency, benchmark outperformance, risk-return strategies are some of the core aspects which should be looked at while investing. Conservative investors or first-time investors can consider these schemes to protect themselves. Although these schemes are not available with all the fund houses, investors have extremely limited choice when it comes to choosing the mutual fund schemes with insurance cover. Therefore, investors invest in these schemes only if fund’s the track record is excellent for the past few years and have the potential to beat the benchmark in near future.

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