The Securities and Exchange Board of India (SEBI) has barred asset management companies (AMCs) from offering insurance products bundled with their mutual fund schemes.
In a June 17 letter, which was addressed to Association of Mutual Funds in India (Amfi), the market regulator observed that some AMCs are proposing to introduce bundled products, while some existing schemes have such bundled products, Like insurance facilities with the plan investment like SIP insurance, etc.
“In this regard, it is informed that any existing scheme or plans proposed for launch shall not contain bundled products,” SEBI said in the letter.
The regulator has advised Amfi to inform all AMCs about the decision.
Mint Ltd. had earlier reported that ICICI Pru MF’s SIP Plus, Nippon India’s SIP Insure, Aditya Birla Sunlife (ABSL) Century SIP and PGIM’s Smart SIP facility are well-known Systematic Investment Plan (SIP) schemes that combine investment with insurance. Currently, only Nippon MF continues to offer this product to its new customers.
Notably, Aditya Birla Sun Life Mutual Fund had earlier announced that it would open its Century SIP facility for fresh registrations from June 16.
Generally, under SIP insurance plans, mutual funds offer a free life cover on starting SIP investments. The life cover, in most cases, was in the range of 100-120 times the SIP amount, which is a . was under 50 lakh limit.
For example, a SIP amount You can get free life insurance up to Rs.10,000 per month 12 lakh, subject to other conditions.
Many mutual fund houses had added insurance benefits at no extra cost to take advantage of its popularity.
However, experts suggest that investors should always separate their insurance and investment needs.
“You never know, such bundled options can get closed at any point of time. If you are financially dependent, go for term insurance. As far as investments are concerned, they are different,” said Viral Bhatt, founder, Money Mantra. Analyze and check their track record before investing.