The DCB Bank last week re-introduced its fixed deposit (FD) schemes with complimentary life covers. Other banks, such as HDFC, also have such combo packages.
Eighteen per cent of India’s total financial wealth is being held in FDs, according to a report titled ‘Future of Fintech July 2022’, published by Boston Consulting Group (BCG).
FDs are popular among Indians, but does it make sense to invest in them when they come bundled with insurance? Let’s explore
DCB bank has partnered with Aditya Birla Sun Life Insurance Limited for offering a bundled FD-Insurance product called ‘Suraksha FD with a fixed three-year term and an interest rate of 7.84 per cent annually.
The life cover could be up the maximum FD amount of Rs 10 lakh. In a press release, the bank also said “no medical test” would be required to obtain the life cover.
HDFC Bank also has a similar product, called SureCover FD. Its FDs ranges from Rs 2 lakh to Rs 10 lakh, and the life cover value is the FD amount. The first-year premium is free, but customers will need to pay a premium for the life cover from the second year onwards.
Certain predefined terms and conditions are attached to such FDs, like eligibility criteria, maximum insurance cover, etc., which you should read before considering this bundled FD product.
Avinash Gaikwad, chief strategy officer (CSO) of Bimaplan, a Bengaluru-based insurance tech platform, said, "customers should make themselves aware of the fine print."
When people age, getting a life cover becomes a costly affair and a challenging process. "If a bank can offer FD bundled with free life insurance, it can be useful for those who need regular income and life coverage," According to Harish Menon, co-founder, and head of investments and product research, at House of Alpha, a financial planning services providing company. "Ideally, the life insurance coverage works well if the term is longer."
However, The tenure of these complimentary insurance products is limited to the FD tenure, and on partial or premature withdrawal, the insurance cover with immediate effect ceases to exist.
"It is recommended that you opt for long-term insurance plans to protect the future of your loved ones. We highly recommend segregating investment and security goals while investing in FDs and other financial instruments to meet your needs," Gaikwad said.
In any case, insurance and investment are two different needs and should ideally be separate. Bundled free insurance is not a replacement for a pure life insurance-only
