SEBI to Relaunch Bundling Term Insurance with Mutual Funds
The Securities and Exchange Board of India (SEBI) is likely to launch a combination product again, where term insurance coverage will be bundled with investment through mutual funds. The market regulator will soon release a consultation paper in this regard to allow more financial inclusion and offer more benefits to investors, as reported by the media.
New Inclusion Initiative for Financial
The proposed framework will allow investors, especially those with low-value SIPs from rural areas, to access a combo product that includes both term life insurance and mutual fund investments. This is aimed at enhancing participation in the mutual fund industry while offering financial protection through insurance.
In 2022, SEBI instructed mutual fund houses to stop bundling of insurance or any other financial products with mutual fund schemes. Hence, LIC Mutual Fund and UTI Mutual Fund were among the few which had to discontinue the insurance cover along with the mutual fund scheme. A lot of other fund houses offering insurance cover along with long-term SIPs had to withdraw this facility also.
Consultation Paper on New Guidelines
The market regulator is now preparing to reassess this restriction through a consultation paper, which will seek feedback on including pure term life insurance with mutual funds. The objective is to provide a structured financial solution, catering to investors who seek both wealth creation and insurance coverage.
Potential Impact on Investors
If launched, this program will help investors in mobilizing two necessary financial products investment in mutual funds and life protection through term insurance. This should be able to motivate more people, especially those from under penetrated regions, to invest in mutual funds while still enjoying life cover.
With SEBI reconsidering this bundling approach, the mutual fund industry could witness a revival of insurance-linked investment products, which would make financial planning very comprehensive for retail investors.
