SIP with Free Life Insurance: Why It Was a Bad Idea in 2011 and Still Is in 2026

By
Hemant Beniwal
-
60
Reliance SIP Insure

Last Updated on April 9, 2026 by teamtfl

“There ain’t no such thing as a free lunch.” – Milton Friedman

In 2019, Nippon India Mutual Fund (then called Reliance Mutual Fund after the Nippon Japan acquisition) quietly discontinued the SIP Insure feature on its equity schemes. The product that had been aggressively sold for nearly a decade – free life insurance with your SIP – simply vanished.

Thousands of investors who had bought SIPs specifically for the insurance cover suddenly had no insurance. And those who had already redeemed early had paid the 2% exit load. Both groups lost.

The product is dead. But the sales pitch is not. Today, multiple fund houses offer bundled SIP-plus-insurance schemes with different names and slightly different structures. Same logic. Same problems. And one new problem: most investors have already forgotten what happened to Reliance SIP Insure and are walking into the same trap with fresh confidence.

⚡ Quick Answer

SIP-with-free-insurance is not free. The “free” insurance comes with a 2% exit load if you redeem early, forces you to stay in one fund house (which prevents switching underperformers), and provides decreasing coverage that reduces every month. Current equivalents – HDFC SIP with insurance, Mirae Asset SIP Plus – have the same structural problems. Buy term insurance separately. Invest in SIPs separately. Never mix the two.

📋 FACTCHECK NOTE – April 2026

Reliance Mutual Fund became Nippon India Mutual Fund in 2019 following the Nippon AMC acquisition. The original “Reliance SIP Insure” product as described in the original 2011 post no longer exists. All specific fund names referenced in the original post have been renamed or merged. The investor dilemma story structure is kept for illustrative purposes – the analysis applies equally to current SIP-insurance products. Birla Sunlife is now ABSL (Aditya Birla Sun Life).

How SIP-with-Insurance Actually Works

Here is the structure that current SIP-insurance products follow (with minor variations by fund house). When you start a SIP of a minimum amount (typically Rs 1,000-2,000/month) for a minimum tenure (typically 3-10 years), you are enrolled in a group term insurance cover. The fund house pays the insurance premium from their own pocket. You pay nothing extra.

The sum assured is calculated as: SIP amount x remaining months of tenure. So a Rs 5,000/month SIP for 10 years starts with Rs 6,00,000 coverage (5,000 x 12 x 10). But this coverage decreases every month as the remaining tenure shortens. By year 5, the same SIP gives only Rs 3,00,000 coverage.

If you die during the tenure, the insurance amount is added to your existing fund units in the name of your nominee. The nominee then has the choice to hold or redeem – but here is the catch: if they redeem before the original tenure ends, they pay the 2% exit load.

Yes. Even on death claims, the exit load applies in most of these products.

A Real Investor’s Dilemma

Here is the kind of situation I see regularly. An investor started four SIPs in 2022 – two in Nippon India funds and two in ABSL funds – partly for the insurance cover. By 2024, two of the four funds are significantly underperforming their category. He wants to switch to better funds.

He cannot – not without losing the insurance cover and paying the 2% exit load on accumulated corpus. His Rs 8 lakh corpus faces a Rs 16,000 exit charge if he switches to better funds.

His choices: stay invested in underperforming funds to protect a declining insurance cover he probably does not need in the first place, or pay Rs 16,000 to exit and invest freely.

This is not a theoretical problem. It is the problem the original post described in 2011, and it is still happening today.

The Real Cost Nobody Calculates

The cost of bundled SIP insurance is not the exit load alone. It is the compounding cost of being locked in an underperformer.

Scenario: Rs 5,000/month SIP, 10-year tenure. Fund A (your SIP-insured fund) returns 11% CAGR. Fund B (where you would have switched) returns 14% CAGR. This is not an unusual gap – many actively managed funds differ by 3-4% from their category average.

After 10 years: Fund A at 11% = approximately Rs 10.5L. Fund B at 14% = approximately Rs 12.5L. Difference: Rs 2 lakh. Exit load you saved by not switching: Rs 16,000-30,000 depending on timing.

The “free” insurance cost you Rs 2 lakh in opportunity cost. Plus: the cover was declining all 10 years and by year 8 was worth about Rs 1.2L – not Rs 6L as you thought when you signed up. A Rs 1 crore term plan costs Rs 10,000-12,000/year for a 30-year-old. The bundled insurance “saved” you Rs 1.2L but cost you Rs 2L. Net loss: Rs 80,000-plus.

Insurance is protection. Investment is growth. They work differently – and they should never share an account.

At RetireWise, we review your SIP and insurance portfolio together – to make sure neither is undermining the other. SEBI Registered. Fee-only.

See How RetireWise Works

Why “Free” Makes Us Do Stupid Things

Behavioural economist Dan Ariely’s research shows that “FREE” triggers a disproportionate emotional response that overrides rational calculation. People will stand in line for 45 minutes to save Rs 100 on a Rs 5,000 item at a “free gift” sale. The zero price creates a positive emotion that short-circuits cost-benefit analysis.

This is exactly what happens with bundled SIP insurance. Investors hear “free Rs 10 lakh insurance with your SIP” and their brain stops calculating. They do not ask: is this cover adequate for my family? What is the exit load trap? What happens if this fund underperforms? Can I switch funds without losing the cover?

Zero Price Effect (Ariely, 2008) combined with Status Quo Bias (Samuelson & Zeckhauser, 1988) explains why investors stay in underperforming SIP-insurance products for years: the “free” label made the entry feel like a win, and inertia makes the exit feel like a loss.

AMFI 2024 data puts this in sharp numbers: SIP discontinuation rate in India remains at 60-65% within the first 3 years. Most of these exits trigger exit loads. For SIP-insurance bundled products, that exit load creates additional friction that delays switching even from chronically underperforming funds – potentially costing investors 2-4% in additional underperformance per year of delay. And to put the “free” cover in perspective: a pure term plan of Rs 1 crore for a 35-year-old non-smoker costs approximately Rs 10,000-14,000 annually in 2026 – giving 10x more coverage than most SIP-bundled schemes at a fraction of the flexibility cost.

Why Rs 10 Lakh Is Almost Never Enough

Here is the other problem with bundled SIP insurance that never gets mentioned in the sales pitch: the maximum cover is Rs 10 lakh in most of these products, regardless of how large your SIP is or how many folios you have.

If your family needs Rs 10 lakh in insurance, you have a much larger financial planning problem than which SIP to choose. The standard life insurance requirement for a 35-year-old with home loan, dependent spouse, and two school-age children is Rs 1-2 crore. Rs 10 lakh is 5-10% of what you actually need. The bundled insurance gives you the feeling of coverage while leaving 90-95% of your risk unprotected.

What You Should Do Instead

If you currently have a bundled SIP-insurance product: calculate your actual exit load cost and compare it against the opportunity cost of staying in an underperformer. If the fund is performing adequately, staying is fine. If it is chronically underperforming (3%+ below category benchmark over 3 years), pay the exit load and move.

If you are evaluating a new SIP: choose funds on the merit of the fund manager, consistent track record, and fit with your asset allocation. Then buy a Rs 1 crore+ term plan separately. The two decisions should have nothing to do with each other.

“2 + 1 (free) is never equal to 3 in personal finance. The free thing always comes with a cost. Find the cost first. Then decide if the product is worth it.”

– Hemant Beniwal, CFP, CTEP | Founder, RetireWise

Read next: Term Insurance – Why It Is the Only Life Insurance You Actually Need

A Rs 10L bundled insurance cover is not a financial plan. It is a distraction from one.

At RetireWise, we help senior executives build proper insurance and investment structures – separately and correctly. SEBI Registered. Fee-only.

See the RetireWise Service

Reliance SIP Insure disappeared in 2019. The investors caught in it paid exit loads, lost insurance mid-stream, and learned an expensive lesson. The current products will likely evolve, rebrand, or disappear too. What will not change is the fundamental principle: any product that bundles insurance with investment is making a trade-off on your behalf – and the trade-off almost always favours the product manufacturer, not you.

Buy the best SIP for your goals. Buy the best term plan for your family’s protection. Keep them completely separate. Always.

💬 Your Turn

Do you have a bundled SIP-insurance product? Have you calculated whether your fund is outperforming its benchmark – and what it would cost to exit and switch? Share your situation below.

60 COMMENTS

  2. Hi Hemant
    I am totally in agreement with what you have said. I came to know about the existence of this scheme from the comment of one investor sometime back. The good thing is the age limit which automatically removes the temptation from many investors. Moreover, there will be hardly any investor willing to lock his money in one fund for such a long time.Insurance amount is insignificant to tempt any serious investor.

    • Hi Anil,
      Everyone is not rational like you – they don’t see things like this. And I must tell you many existing SIP investors are converting their normal SIPs in SIP with Insurance.

      • Hi Hemant
        Thanks! I am surprised to learn this.I agree, sometimes the investors behave in the most irrational manner.Recently I decided to take advantage of the market correction and make some investments in equity mutual funds.I visited the office of KARVY in the morning.In the past whenever I have gone to this office in the morning I have hardly found anyone there.I was surprised to see a large gathering of people there.I learnt that all those people had come to discontinue their SIPs and for redemptions.In that gathering I was the only person who had come with transaction slips and cheques to make new investments.

  3. fully agree.
    recently one scheme has been suggested to me ICICI GSIP
    will you able to guide on that
    Regards,
    Pravin

    • Hi Pravin,
      If I am not wrong this is an insurance policy – ICICI Pru Guaranteed Savings Insurance Plan

  4. really well explained! thank you. i don’t have any sip , but i got bsl dividend yield plus growth mf investment lump-sum, and perhaps there also some term insurance benefit, but i am not aware whether there is exit load , even after one year holding. i will check. recently i have commented that sometimes our financial problem is due to not figuring the actual cost of any new addition to our luxuries/necessities e.g. a family car for status or mania. the same is applicable to investment also.

    • Well said Bharat. “sometimes our financial problem is due to not figuring the actual cost of any new addition to our luxuries/necessities e.g. a family car for status or mania. the same is applicable to investment also.”

  5. We need to look at the basic purpose of insurance as a tool for contingency protection.Insurance or for that matter anything in this world will not come free.You have highlighted certain aspects which are not in the public domain, for ex., 2% exit load,stiff requirements of not changing the bank account.There are many persons who are benefitted by this s.i.p insure.You might be aware of the tragedy of 90% of the victims of u.l.i.p saga (aswathama athaha kunjaraha) which is quite rampant across the whole life insurance segment.You also might be aware of the clandestine loads in devious ways being cleverly executed.Compare this with the s.i.p insure or century s.i.p, which is free.

      • Hi Hemant,
        You are looking very correct when you say, do not mix Insurance and Investment. Are we talking about income insurance or Investment Insurance (Target based). ex. I want to make sure that after 12 years My son has enough amount for his study (Graduation) irrespective of me being in world. If I have term plan, it will be encashed immediately with no charges and my family may be misled to put money in wrong places, from where no return of even principle. It is similar to Pension Scheme.

        No talk about reduced Insurance every year.
        I was looking for a product where insurance decreases regularly as target is nearer every year(I do not know other products are there in market).

        Long tenure: LIC, other ULIPs all are meant for long term and very rarely anybody switch their money regularly/even once. In first preminum they cut nearly 20-50% of total amount which is not good as this amount was going to be invested for longest period and getting maximum returns probably. In SIM insurance type products we get very cheap insurance and cost is “stay invested”, very similar to ULIP and LICs.

        Insurance Discontinuation:
        Definitly If you default any Insurance premium in any insurance scheme, you can not continue.

        • Hi Vinay,
          I have shared what I will which is right for 90% of the people but if you are convinced that this is the right way to take insurance – you are the best judge about your personal situation.

  6. Sir,
    I have 2 sips in Reliance mf.But I am lucky_ no body contacted me for insurance.Good article.I always feel energetic after reading ur articles.
    Thanks and regards.

  7. Dear sir

    I really agree with you, if i here then i also preferred ULIP PLAN. This is very good articles.

  8. Hi Hemant..thanks for the article, a common man usually fall in trap seeing the double benefits.. but surely your words made lot of sense.

  9. Hello Hemant Thanks for the heads up. So I want to start a SIP in Reliance Equity Opportunities Fund. So should I start a SIP with Reliance AMC at all? My concern is that even if I don’t opt for SIP Insure (Thank God its Optional), doesn’t the premium paid on behalf of those who have opted for it affect the Corpus of the Fund managed by AMC. In simple words I want to make sure whether this Premium Expenditure incurred by the AMC is a part of Expense Ratio & does it affect those Investors too who have not opted for the SIP Insure? Hope I have made it clear.

    • Hi Amit
      You can start your SIP in Reliance Equity Opportunities Fund.Surely it can not affect the majority of investors who do not opt for insurance.

    • @amit
      if term insurance is optional, and you select because of its performance , then logically , the loss to who opted, could be added to who, not opted , provided the amc would not cough out all benefits such occurred in name of expenses!am i wrong, hemant?

      • Yea Thanks for the reply. But where does the AMC pays the premium from?…from its own pocket? isn’t the same deducted from NAV?

  10. Hemantji, I had a mild heart attack when I got an email from TFL with the subject line “Do not invest in Mutual Fund SIP”, LOL. After reading the complete article, I got the message right.
    Agree with you, Investment and Insurance are best performed if kept separate.

  11. I feel the article is too harsh on Reliance. Mind you i have nothing to do with Reliance but as a general reader, i am saying this.
    Each company charged 2% as exit load if one comes out of investment in less than a year. So why reliance has been targeted here?
    Plus I need to double check on the insurance cover.
    As per my information, one is given insurance cover of Total SIP Amount in first 2 years after which it is doubled.
    That means if one starts a insurance cover of 5,000 Rs for 15 years.
    Insurance cover for first 2 years will be 5000*12*15=9,00,000 Rs.
    Insurance cover after 2 years will be 9,00,000*2=18,00,000 Rs.
    I will double check on insurance cover capped at 10 lac & let you know asap…

    • I self work as mutual fund distributor…and invest 3000 per month in reliance growth fund through SIP Insure…I agree that since last few months performance is not at par but i do not think this is the reason so that I close this sip…as there are number of examples where good funds have turned bad and bad funds have turned good…currently i have accumulated just above 1,50,000 in this fund.Even if I decided to stop SIP then i will only stop the sip and will not withdraw the accumulated amount.It will not affect me so much as only cover will ceased..

      TO Rajesh Singla: Its true that after 2 years cover doubles that of unpaid sip installments but upper limit is capped at 10 lakh..

      • Hi Paresh
        After investing in equity mutual funds it is very important to track the performance of all funds in your portfolio by comparing with index and peers.If a fund consistently performs poorly over a long period of time,there is no justification in getting attached to it emotionally merely based on its past performance hoping against hope that it will turn around some day.

        • Yes its true that it is necessary to track the performance.but it should not be as frequent as we shift the jobs now a days.Its really impractical as we do not guarantee that how new fund will performed.Rather I have good diversification in my portfolio which is more important for me.

          I think portfolio stated above by hemant have a real problem of more mid cap orientation and in that context it should be reduced and good large cap funds should be added.

      • Hi Paresh/Rajesh,
        In Reliance SIP Insure (new version) insurance amount goes down with every passing month – I think you are talking about the earlier version.

        • Dear hemant,
          I was not aware of the recent changes.Earlier there was also a reducing insurance only it was twice that of unpaid installments after 2 year.

          Finally it is only extended and optional facility.I think Exit load of 2% will bind me to invest and remain invested for the entire term.

    • Hi Rajesh,
      When we talk about exit loads in equity funds – it is 1-2% for 1-2 years but in Reliance SIP Insure it is 2% even if you withdraw it in 10-15 years.
      There will an Exit Load of 2%, if the accumulated units acquired or allotted under Reliance SIP Insure are redeemed or switched out or the SIP Insure is discontinued or it is defaulted before the maturity of committed Insure tenure or before completion of 55yrs of age whichever is earlier as opted in the respective scheme either by the SIP-Insure unitholder or by the nominee, as the case may be.

  12. Excellent, thanks a lot,
    Hemant. the article give me the right prespective at the right time. The best word is “Let’s save few more financial lives”.
    Apart from the drawbacks pointed out , following conditions also apply
    1. the total insurance available is limited to Rs 10 lacs only
    2. The insurance available will increase years wise
    i,e I year for 10 times the SIP amout only .
    II year for 20 times the SIP amout only
    III year onwards for 100 times the SIP amout.

    lastly, you have not touched upon the possible under performance of Fund selected.

    • Hi Kumar,
      Your query motivated me to write this – so thanks to you.
      Your 1st pointed I have covered in article – your 2nd point feature were part of old version of SIP Insure. (new version features are totally different)
      Your final point I have tried to touch in – why one should not invest in Reliance SIP Insure. (point 2nd & 3rd)

    • Hi, Kumar,
      you are probably referring to the Insurance offered by Birla Mutual fund and the features mentioned by you in NOT by reliance….

      • yes, you are right, the features mentioned belongs to birla mutual, where as Reliance mutual covers the unsubscribed portion of SIP’S

  13. Hello Mr. Hemant & others,
    In fact I am not much aware about investments and as a layman, I have purchased LIC’s Wealth Plus- Growth in the year 2009 for premium term of 10 years @ Rs. 1.00 lach per annum with initial lock-in period of three years. I don’t know about end product after maturity period of 10 yrs but while purchasing the investment policy, the DO of LIC calculated it roughly about Rs. 24 laks at the end of 10 years. Please guide me whether I should it since the first lock-in period of three years is approching. In addition also guide me where I should invest to get good returns
    Thank you

  16. Hi Hemant,

    Thanks for the input, really nice. Last week only one of my financial consultant suggested me to apply for Reliance SIP insure.

    I was asking him for “term insurance” then he suggested me this plan saying investment + insurance, but he did not inform all the above which u mentioned. Anyways thanks for the complete info and now i decided that investment should be different and insurance should be different.

  17. Hi Hemant & Anil
    What about birla sunlife century SIP ? One of my friend is going to invest in it. I gave him suggestions don’t mix your investments with your insurance. But i don’t have any solid reason to suggest him.

    • Hi Kawardeep,
      I think I have already shared couple of reasons – same also apply to birla sunlife century SIP.

  19. Hi Hemant,

    Thanks, I was thinking of getting LIC ankur, after reading your article, I changed my mind. Please suggest other alternatives.

    Thanking you
    Jaykanath

  20. Dear Sir,

    I am paind to late you know that I invested in your SIP Policy and the premium is being deducted from my SBI Naharlagun @Rs,2000/- PM, Arunachal Pradesh A/C W.E.F July 2011 and a computer printed reciept only recieved by me from one M/S ABIRA MANAGEMENT SERVICES, KOLKATTA. I am at a lose, since I am not getting any statement of accounts from Reliance as assured by the agent when the proposal was made.Please help me sending on statement upto feb 2012 so that I do not loose trust on your esteemd company. I furnish below my e-mail with my Communication address –
    ASHUTOSH GHOSE
    c/o-R.C.S OFFICE NEAR HIGH COURT

  21. hi Hemant,

    Read your article.I was wondering if you know about Reliance Mutual Fund Investment plan?is it a good idea.

    please let me know as i would like to invest in a good company.
    Regards,
    sun

  22. Hi hemant,

    Actually i am looking on advise and more information on investments,I am a beginner to investments and would like to know if Reliance Money Manager scheme (reliance mutual fund ) is a good option to invest in or not?
    i dont want to invest in gold.So please let me know any other investment schemes that would be good for me for short term .

    Thanks
    sunita

  23. I have invested directly by going to Reliance AMC in RSF equity fund in 2009. The man in counter never told me all those hidden facts.He just said there is a free insurance for 10 Lakhs. And I have the good health declaration form and took it. My SIP is finishing in 2014 july.

    Now when this fund is performing very poor for last 3-4 years I am thinking to liquidate it. And I was just planning to discontinue the SIPs. But its my good luck that I came to this page and understood the exit load issue. Now I have taken out the documents and found that everything was written which I never gone through carefully.

    Thanks Hemant Ji, I just got the point in time before making the move.

  24. Hemant Ji,
    One thing is still not clear to me that documents says
    1) Policy tenure is 15 years from Start of SIP
    2) Exit load if the committed SIP tenure broken

    In my case committed tenure is 5 yrs. So can I liquidate after 5 yrs or have to wait 15 yrs for avoiding 2% exit load.

    Pls advice.

  25. I have started Reliance SIP Insure in year 2009. 2 schemes : Reliance growth and Reliance equity opportunities. My tenure is upto 2019. What should I do? Stop the SIP? The funds are not performing well. Pl. guide.

  26. This article is totally wrong. & Mr.hemant is not believer in Systematic investment plan because brokerage is low rather he is promoting ulip where commission more.
    But customer have to pay lot more charges.

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