Mutual Fund Alert: Should you go for an investment-cum-insurance plan? Check what experts’ say


Mutual fund insurance: While mutual fund investments are gaining popularity among Indian investors, mutual fund houses are also busy coming up with innovative plans that can grab the eyeballs of the investors. A mutual fund with insurance offer is one such idea that mutual fund houses have coined these days. Such mutual fund plans are customised in such a way that if an investor opts for such investment option, he or she will have to pay around 0.5 per cent to 0.75 per cent additional expense ratio to ensure completion of the mutual fund plan even when he or she dies in between the maturity period. Generally, a mutual fund house charges around 2.5 per cent expense ratio on the investment and if an investor opts for a mutual fund with an insurance option plan, then he or she will have to pay around 3.25 per cent expense ratio.
Speaking on the mutual fund with insurance options Kartik Jhaveri, Manager — Wealth Management at Transcend Consultants said, “Mutual fund houses are coming with the idea of mutual funds with insurance option. In such plans, an insurance company would continue investing if the investor dies amid a period of the mutual fund scheme. For availing such mutual fund option, one needs to pay around 0.5 per cent to 0.75 per cent addition expense ratio on the investment.” Jhaveri said that generally, the expense ratio in any mutual fund is around 2.5 per cent. So, if an investor chooses to buy a mutual fund scheme having an insurance option, his or her expense ratio would go up to 3.25 per cent from 2.5 per cent.
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Jitendra Solanki, a SEBI registered tax and investment expert said, “Mutual fund houses are offering some schemes that have insurance option. In these schemes, your investment is insured and continuity of the investment would remain even when you are no more. So, the insurance option ensures that the scheme would continue even when the mutual fund investor is no more.” However, he said that such options are limited and there is no surety whether the scheme would give better returns or not.
Elaborating upon the difference between a mutual fund with insurance option and normal mutual fund Kartik Jhaveri said, “An investor must understand that mutual funds are made for making money. For coming across death, there are direct insurance plans available in the market and it’s wise to invest in direct insurance rather than investing in mutual funds with insurance option.”


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