Bank deposits have grown significantly in the last year as people focused more on holding on to their capital in the near term. Consequently, banks are doing different things to get a bigger share of the deposit pie. One such incentive is to make fixed deposits (FDs) more attractive to customers via special FDs with additional benefits such as health and life insurance.

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Currently, several banks such as HDFC Bank, DCB Bank and ICICI bank are offering insurance bundled with the fixed deposit (FD).

Under HDFC bank's 'SureCover FD', a life insurance cover equivalent to the fixed deposit principal for the first year is provided. The minimum amount, one can invest here, is Rs 2 lakh and the maximum is Rs 10 lakh. The interest rates offered are the same as regular fixed deposits.

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On the other hand, ICICI bank’s ‘FD Life’ offers complimentary life cover of Rs 3 lakh for 1 year on opening FDs of value Rs 3 lakh and above for a minimum tenure of 2 years. The lender’s ‘FD Health’ gives complimentary critical illness cover of Rs 1 lakh with FD of value between Rs 2 lakh and Rs 3 lakh.

However, it’s important to understand here if it’s right to invest in these products?

According to Adhil Shetty, CEO at BankBazaar.com, these FDs are not a substitute for having comprehensive life insurance but only additional protection.

Hence, Shetty said, that these products cannot take the place of a life insurance cover for several reasons.

“In the first place, the amount of cover would not be sufficient in most cases as the life cover is mostly equivalent to the amount invested. Also, if individuals plan to break the FD, they will lose the life cover,” Shetty added.

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Additionally, Shetty explained that the bank issuing the FD may not be the insurer, and the life cover may have been issued as part of a tie-up between the bank and the insurer. In this case, if the tie-up ends, then the individual buying the product would no longer be able to avail of the insurance facility on the next renewal.

So, while an additional benefit is of course always welcome, Shetty opined that one should keep savings, investments, and insurance goals separate and not mix them.

Disclaimer:

The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

(Edited by : Ajay Vaishnav)

First Published:May 26, 2021 2:54 PM IST