To counter the Ulip mania, asset management companies in 2008 came up with a counter offer; insurance cover on SIP investments. Two fund houses; Reliance and Birla Sun Life launched Reliance SIP Insure and Birla Sun Life Century SIP. The two schemes did not find many takers during the 2008 crisis but there has been renewed interest in both these schemes. These SIP insurance plans offer a maximum free term insurance cover up to Rs 20 lakh in case of BSL Century and Rs 10 lakh in case of Reliance Insure.
Although insurance is offered free, there is cost associated by way of exit load on early redemption (See: Combining Insurance and Investments). For instance, BSL Century attracts a 2 per cent exit load on redemptions in the first three years while Reliance Insure charges a 2 per cent exit load throughout the investment tenure.
Those seeking such investments will be better of opting for the BSL scheme over Reliance Mutual Fund because in case of the BSL scheme insurance cover does not cease on termination of SIP unlike the Reliance option. Moreover, in case of the Reliance plan the exit load is applicable even in case of death of the investor.
The SIP insurance option is available across several fund schemes from both the fund houses. But, for long-term investors, investing in the BSL Century SIP works better compared to Reliance Insure. Remember; insurance cover with these funds should at best be treated as additional protection and not be primary life insurance.