Insurance for investment

Providing an insurance cover to investors in mutual funds has become a fad. Though the idea was initiated by DSP ML back in 2005, others were quick to follow.
Recently Birla Mutual Fund came up with 'Birla Sun Life Century SIP'. Investors who invest via the systematic investment plan (SIP) in 18 of the equity schemes of this asset management company (AMC) will be entitled to a life insurance cover and the insurance expenses (premium) will be borne by the asset management company (AMC).
The caveat: the investor must be between 18 and 45 years of age when applying for the scheme and the minimum SIP amount must be Rs 1,000.
So how much will the insurance cover be? The amount of insurance cover for the first year will be 10 times the SIP investment made by the investor. For example, if an investor has a monthly SIP of Rs 5,000, he will be entitled to a coverage of Rs 50,000 (Rs 5,000x10) in the first year. In the second year, it goes up to 50 times and 100 times from the third year onwards.
However, the insured amount is limited to a maximum of Rs 20 lakh.
Reliance Mutual Fund has come up with an insurance scheme which benefits the fund house as much as the nominee of the insurance policy. Termed as 'Reliance SIP Insure', the AMC will make the required unpaid SIP payments (up to Rs 10 lakh) should the investor die during the tenure of the SIP.
As a result, the investor's long-term financial planning and objective of investing are continued as per the targeted time horizon even if he dies. Sounds great but this holds only if the SIP is for a period of at least three years with a minimum monthly payment of Rs 2,000. Here the age at the time of investment should be between 20 and 46 years.
DSP ML covered five schemes and investors between 18 and 43 were eligible with a minimum SIP of Rs 2,000. But the tenure was quite long: 6, 11 and 16 years. Under this plan, the monthly SIP instalment amount multiplied by the number of months remaining for the scheme to end would be given to the nominee. That was the variable plan. Under the fixed plan of 21 years, an amount equal to 240 times the monthly instalment would be paid anytime during the tenure should the investor die.
Kotak AMC in 2007 launched its Kotak Star Kid Plan whereby only a child could be made the nominee and this insurance was solely applicable to Kotak 30 and Kotak Tax Saver. The SIP tenures were 5, 10, 15 or 20 years. In the case of death, the balance SIP amounts to be invested would be paid to the nominee with the maximum insurance benefit restricted to Rs 10 lakh.
The age at the time of entry is higher than the other schemes, at 23 years. But then again, since it is targeted at one's child it seems fair enough. But it does have a maximum age limit for entry: 45 years, irrespective of how many children you have by then.