Save and be Insured

Kotak MF offers SIP with a cheap life cover

Bundling your insurance and investment needs into one is an expensive proposition. For example, unit-linked insurance policies charge a first-year commission as high as 30 per cent.

But, now you have a mutual fund (MF) that will meet both these needs at a much lower cost.

Kotak MF has launched Kotak Star Kid (KSK), which merges investment and insurance needs at a lower cost. All you need to do is start a fresh systematic investment plan (SIP) in either the Kotak 30 scheme or the Kotak Tax Saver fund over a tenure of either 5, 10, 15 or 20 years. You can then appoint your child as the nominee.

KSK offers you a life cover—provided by Kotak Life Insurance—at an entry load of 3.25 per cent, 1 percentage point more than what SIPs typically charge (2.25 per cent).

Your choice is not unlimited though; the mutual fund has laid out the options for you depending on your age (see Your Options). Since KSK is aimed at fulfilling the needs of your child and also insuring them, it is open for ages 23 to 45 years.

How much cover?
At any time after the 13th month, your cover is the sum total of the remaining SIP instalments. For instance, if a unitholder opts for a 5-year SIP at a monthly sum of
Rs 5,000, and dies in the 13th month, the amount that the nominee gets will work out to be Rs 2.40 lakh (60 months less 12 months x Rs 5,000). Until the 12th month, the cover is 10 times the monthly SIP value. Under both cases, the nominee will also receive the prevailing value of all the instalments already made. No medical tests are required up to a maximum cover of Rs 10 lakh; between Rs 10 lakh and a maximum cover limit of Rs 1 crore, tests are mandatory. KSK does not cover existing SIPs; you’ll need to start a fresh one if you wish to opt for this facility.

KSK is akin to the Super SIP facility that DSP ML MF had launched in 2005, but is different in bits. Despite being a good initiative, the product found few takers as many investors refused to commit money for the long-term. Sandesh Kirkire, chief executive officer, Kotak MF, however, is confident that KSK will work because he says the product is simpler to understand than Super SIP. “Also, KSK is an on-going facility and is open throughout. Unlike SSIP, we do not intend to keep it open for a limited time period,” says Kirkire.

Should you opt for it?
At present, KSK is available only in Kotak 30 and Kotak Tax Saver. It’s not yet available in Kotak Opportunities fund (KOF)—the MF’s most successful fund in the past three years. Kirkire assures that KOF and a host of other Kotak schemes will soon get included in KSK. By turning the tables on insurance companies on the back of sweetening systematic investing with a cheap insurance cover, here’s one effort that ought to give a boost to the MF industry caught on the wrong side on account of aggressive mis-selling of Ulips on the back of higher commission. Opt for KSK in Kotak 30 or wait till the MF includes KOF in the plan.


(by outlook money)