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October 2, 2008

Asset management companies (AMCS) will no longer offer their products bundled with free life insurance cover. These products have become very popular with investors as they offer an insurance cover against regular systematic investment plans (SIPs). Of the four products, three-Reliance's SIP+ Insure, Birla Sun Life's Century SIP and Kota's Star Kid-ended on September 30. The fourth, DWS Tax Saving Fund, is a tax saver and, hence, comes with a three-year lock-in period.

Mutual funds allegedly offer these products without any regulatory scrutiny. In fact, mutual funds were offering these products to counter the growing popularity of unit-linked insurance plans (ULIPs). The SIP products, with a variety of insurance features, did manage to pep up sentiments. Srikala Bhashyam, a Bangalore-based Investment Strategist, not only recommended these products to her clients, but also bought two products-one for herself, and the other for her 13-year-old daughter. Such offers, she says, don't come by in a stable market.

SIPs help individual investors save as well as invest regularly in specific schemes. The insurance facility was just an add-on feature under group term insurance schemes. The products provided free life insurance cover at no extra cost to a scheme's subscriber. There were different schemes offered by the mutual funds, but all of them allowed the investor to take the maximum advantage of SIPs' features of a regular saving coupled with insurance.

For SIP investors, this is not good news. But mutual fund houses say they will come out with these products again once the air clears. Says Sundeep Sikka, Deputy CEO, Reliance MF: "If everything is all right, we will relaunch the product."

K.R. Balasubramanyam

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