What happens If a person dies after opening an SIP, does the SIP have to be paid?

 What happens If a person dies after opening an SIP, does the SIP have to be paid?

SIP or Systematic Investment Plan is a method of investing wherein the investor commits to invest a certain amount regularly in an investment plan. The frequency could be anything - monthly being the most popular. The investment plan can be a bank (recurring) deposit, other term deposits or market-linked schemes such as Mutual Funds. 

Unlike a loan repayment (EMI), the SIP is not a compulsory payment. If you default on a loan EMI, the consequences could be severe. In the case of SIP defaults, the only consequence is the missed investment. (The invested amount so far continues to remain invested.) When the SIP was first started, one usually sets up a bank mandate. The mandate is usually for a fixed period and amount. On every trigger date the mandate is invoked - say every month (or the frequency date). There will be an instruction to the bank to transfer the said amount to the investment scheme.

Now what happens if the investor dies while the SIP is still active? Basically nothing. The SIP will continue till its end date. The investment company is unlikely to know that the person has died. Even the bank may not know unless the heir or nominee initiates any action. If the bank account does not have sufficient funds, there will be a roadblock. In this case, there will be the same penalty as with a cheque being dishonoured. If the heir or nominee closes the bank account, the direct debit mandates will cease to exist automatically. The SIP will stop also.

Hope this explanation helps.

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