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Business News/ Money / Personal Finance/  Read the terms before investing in FDs with insurance benefits
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Read the terms before investing in FDs with insurance benefits

These FDs generally offer standard rates so, you will get the same deposit rate as offered on a normal deposit with no additional benefit

Banks generally tie up with health insurers and offer benefits under group policiesPremium
Banks generally tie up with health insurers and offer benefits under group policies

The interest rates on bank fixed deposits (FDs) are at historic lows. To attract more depositors, banks are offering FDs with additional benefits such as an insurance cover. DCB Bank launched an FD with health insurance benefits in November 2020. ICICI Bank also offers a bank FD which provides benefits, including health and life insurance covers under different variants.

Banks generally tie up with health insurers and offer benefits under group policies. The benefits vary from bank to bank. For example, DCB Bank has tied up with ICICI Lombard General Insurance Co. and offers benefits like OPD (out-patient) consultations and pharmacy expenses to a certain limit, among other benefits, under its Health Plus FD. ICICI Bank is offering a critical illness plan under its FD Extra option.

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So does it makes sense to go for such FDs?

Features

Rates and tenure: These FDs generally offer standard rates. So, you will get the same deposit rate as offered on a normal deposit with no additional benefit. However, the tenure is generally fixed. For example, DCB Bank’s FD is available only for a tenure of 700 days. ICICI Bank’s FD has a minimum term of two years.

Investment limit: There is generally a ceiling on the minimum and maximum investment amount. For example, DCB Bank’s FD has a minimum investment amount of 10,000, while ICICI Bank’s FD has a minimum and maximum investment limit of 2 lakh and 3 lakh, respectively.

Limited cover: The coverage provided under these policies are limited. For example, in case of ICICI Bank’s FD, the critical illness cover is only for 1 lakh. Also, there are age limits. For example, the depositor shouldn’t exceed 50 years of age to invest in ICICI Bank’s FD; the limit is 70 years for the DCB Bank FD.

Should you invest?

These FDs provide the same rates with additional benefits. So, if you are investing for the same tenure and meet all the conditions, you may consider them, but be careful.

“Read the terms and conditions carefully before investing. For instance, one of the FD variants has a tenor of two years but provides health cover only for one year. Another FD variant has a range of benefits that vary depending on the amount invested. The minimum and maximum age criteria also vary across products," said Adhil Shetty, CEO, Bankbazaar.com.

Also, don’t depend on it for your health insurance cover. “The cover may extend only to the first depositor in most cases, and the coverage may not be sufficient. Also, if you need to break the FD, you will lose the health cover. Most importantly, if the bank’s tie-up with the insurer ends, then you would no longer be able to avail the cover on your next renewal," said Shetty.

Assess all aspects before investing in these FDs.

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Published: 11 Jan 2021, 06:42 AM IST
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