After the success in bancassurance, Life Insurance Corporation of India and other insurers are now eyeing mutual funds as a prospective business proposition for offering life cover to investors at nominal premium rates.

LIC, which has ties with major banks like Corporation Bank, Oriental Bank, Indian Overseas Bank and UCO Bank, has now tied up with JM Mutual Fund for providing life insurance cover to investors who invest in the initial public offer of its monthly income plan JM MIP Fund.

"In the event of death of the investor of JM MIP Fund, the nominee will get a sum assured amount equal to what was invested in the IPO. The nominee can also withdraw the amount invested in the scheme," Nandkumar Surti, head (fixed income), JM Mutual Fund, told PTI in New Delhi on Friday.

This means if an investor buys JM MIP for Rs 10,000 and dies after some time, his nominee will get more than double the amount -- Rs 10,000 from LIC plus a minimum Rs 10,000 from the mutual fund if the NAV of the scheme is over Rs 10 at that time.

With this group insurance scheme, JM Mutual Fund is targeting about Rs 100 crore (Rs 1 billion) from its MIP fund, which would invest 85-100 per cent in debt and 0-15 per cent in equity.

"Depending on the success of the scheme, we may launch more schemes which will offer life cover," Surti said.

LIC is not the only insurer, which is tapping the mutual fund segment for increasing its business. Kotak Mahindra Mutual Fund had earlier offered life cover from OM Kotak Life to investors in one of its fixed income schemes for the first three months.

Although the trend to offer life cover is new, industry sources said the mutual fund arms of LIC and GIC had offered personal accident cover to investors some time back in 1992-94.

The emphasis is now on offering life insurance cover to the mutual fund investors.

While fund managers are able to value-add their products with the life cover, insurers see business opportunity in tapping the Rs 1,00,000 crore (Rs 1,000 billion) mutual fund industry.