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Should you go for FDs based on health insurance benefits they offer?


Interest rates on bank fixed deposits are at historic lows. Therefore, banks are offering additional benefits with the fixed deposits to attract customers.

Banks generally tie up with health insurance companies and offer insurance benefits under group policies. The health insurance benefits vary from bank to bank depending on their tie-up with the insurance companies. DCB bank has tied up with ICICI Lombard and offers benefits like OPD consultations, pharmacy expenses to a certain limit among other benefits. ICICI Bank is offering critical illness plan under its FD Extra option.

Let’s understand some of the features of these fixed deposits and should you go for them?

Interest rates and tenure: These fixed deposits generally offer standard rates. So, you will get the same deposit rate as offered on the normal deposit. The tenure is generally fixed.

Investment amount: There is generally a ceiling on the minimum and maximum investment amount.

Limited cover: The coverage provided under these policies are limited. 

Should you go for these FDs?

These fixed deposits provide the same interest rates with additional benefits. So, in case you are investing for the same tenure and eligible amount, you may go for these FDs. However, in case you are planning to invest in these you should have clarity about the offer. It is essential that you 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,

Another important aspect is a depositor shouldn’t totally depend on these health insurance covers. These are not replacement of a comprehensive health insurance policy. The cover may extend only to the first depositor in most cases. The amount of cover also may not be sufficient. If you need to break the FD, you will lose the health cover. Most important, the bank issuing the FD is not the insurer. The health cover is issued as part of a tie-up between the bank and the insurer. If the tie-up ends, then you would no longer be able to avail the insurance facility on your next renewal. So while an additional benefit is of course always welcome, keep your savings, investments, and insurance goals separate and do not mix them.

Source : Live Mint

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