Investing through mutual funds is beneficial because it has both insurance and loan facilities. Knowing the different services provided can assist investors in making informed choices on how best to maximize their profits from the stock market. The article depicts the mutual fund insurance features and loan facilities offered, along with investment discipline through the Systematic Investment Plan (SIP).
Mutual Funds Insurance
Life insurance is usually provided as an added benefit with the purchase of mutual funds in most financial institutions. Some of the most popular plans include:
Systematic Investment Plan (SIP)
Century SIP (CSIP)
SIP Insure
Eligibility Criteria SIP Coverage Amount
Insurance benefits can only be claimed after SIP has been in place for 36 months or more.
No insurance benefit will apply if SIP is terminated within three years.
The cover lasts till the recovery age of 50-\55 years.
In the case of death of the investor, the nominee receives the claim.
Insurance Cover Amount Calculation
In this instance, we define the coverage amount as:
SIP Amount x 10 = Insurance Cover Amount.
Example:
SIP Amount: Rs.10,000.
First-year Cover: Rs.1,00,000.
Second-year Cover: Rs.2,00,000.
Third-year Cover: Rs.3,00,000.
Eligibility:
To Qualify for the Insurance Facility
Age Limit 18-51 years
Must Have an Active Mutual Fund Participation
If there are other investors, the Primary Investor is the only one eligible.
Medical Fitness Required
Nominee is paid compensation upon investor’s death.
Insurance Limits Pertaining to Mutual Funds
Different fund houses have different levels of coverage, the minimum level being Rs.20 lakh and maximum level being Rs.50 lakh.
Insurance cover is further segmented based on the SIP installment amounts.
Age restrictions are not applicable against the insurance cover.
What Happens If You Stop SIP Payment?
SIP can be stopped at any minute.
There are no exit load fees if SIP is terminated after 36 months.
If SIP is stopped within the year, an exit load of 2% will apply.
Those who stop SIP before a three year term will see an exit load of 1%.
SIP discontinuation leads to the lapse of insurance coverage.
Against Mutual Funds, Loans
Investors can obtain loans backed against their mutual fund investments without liquidating them.
Steps to Follow to Get a Loan Backed Against Mutal Funds?
The loan is provided by banks and NBFCs (Non-Banking Financial Institutions).
It is possible to borrow against the assets of a mutual fund up to 60% of its market value.
There are no advance requirements of selling any mutual fund units.
It is faster than expected.
The units of the mutual fund are accepted as security in exchange for the loan.
Benefits of Loans Against Investment in Mutual Funds
Investment is kept, yet money is accessible.
The approval of the loan is, with no complications.
Payable interest is drawn from the linked funds so there is less pressure on personal finances.
The interest rates are much more favorable than personal loans.
Interest Rate and Processing fees
Interest Rate: 10-12%
Processing Fees: 0.5% – 0.75%
What Occurs When Default Occurs?
Mortgage units of mutual funds will be sold in order to recover the remaining balance of the loan.
Systematic Investment Plan (SIP)
A SIP allows the mutual fund company to withdraw a fixed sum from the investor’s bank account at certain intervals, which helps the investor maintain an investment discipline.
What Happens If You Do Not Pay SIP Installments?
Non-payment results in a fine or penalty and in extreme situations the fund house might cancel the SIP.
How To Suspend SIP?
Withdraw to suspend SIP, mentioning the period. Write to state the investor details, including name, folio number and the mandate from the bank. All pooled investors must endorse the suspension request form. The posting of the form should be done at one month earlier than the halt.
Key issues to consider when pausing SIPs
This is not provided by all asset management companies. Only one time per period. Users of stock exchange portals or online services most likely do not qualify.
conclusion:
Fidelity and the rest such as index and ETF’s have a wide range of mutual funds to choose from. These allows a more diverse investment opportunity. There are always rules and regulations to remember when investing into mutual funds.
Systematic Investment Plans (SIPs) allow for investing in the market, stocks, and money funds in a systematic order.
Insurance and loans against mutual funds allow for greater security and liquidity.
Intelligent investing guarantees the performance of the portfolio, which translates into financial prosperity over the long run.
Analyzing these options allows investors to make prudent choices regarding their finances, thus maximizing their investment in mutual funds.
