Is it worth going for bank deposits offering free insurance?

The journey of insurance-bundled products was initially introduced by life insurance companies and is carried forward by mutual funds and now, several banks also offer the same. We all know that it is not at all prudent to mix insurance with that of investment. However, we have seen mutual funds doing it and now, even banks have joined the league by offering free term insurance with bank deposits. Banks such as HDFC, DCB and ICICI began to offer free term insurance cover with fixed deposits (FD). However, one thing to remember here is that the cover stops the moment you prematurely withdraw from the FD. 

HDFC Bank calls it ‘SureCover’, which offers a complimentary life insurance cover issued by HDFC Life Insurance. Here, on deposits of Rs 2 lakh to Rs 10 lakh, HDFC bank will bear the premium cost of the term life cover for one year. Something similar is also offered by ICICI Bank and DCB Bank. However, the question is whether it's okay to opt for that? We shall find out in this article. 

The offer 

As said earlier, for all investments ranging from Rs 2 lakh to Rs 10 lakh made in HDFC Bank’s ‘SureCover’ FD, tenure of 1-10 years would be eligible to receive a complimentary term life insurance cover. The life cover would be equivalent to the FD’s principal amount. Having said that, the benefit of the life insurance is only for the first year of the FD tenure, which will cease to exist after that. 

ICICI Bank on deposits of Rs 3 lakh or more offers a flat Rs 3 lakh pure term life cover. The bank offers this via its ‘FD Life’ scheme. However, to become eligible for the life cover, the minimum tenure of FD should be minimum of two years. Similar to HDFC Bank’s ‘SureCover’, even ICICI Bank’s FD Life’s life insurance benefit is only for the first year of the FD tenure. 

However, unlike HDFC Bank and ICICI Bank, DCB Bank’s ‘Suraksha FD’ offers a term life cover for up to Rs 50 lakh, which would be equivalent to FD’s principal amount. The tenure of this FD scheme is three years and even the life insurance cover would be available for the term of three years. 

Should you opt for one? 

We strongly believe that, rather than mixing insurance with investment or saving, one should have it both separately. This will enable you to enjoy the benefits of both worlds. Moreover, if your FD matures or you prematurely break the FD, then you would no longer be covered. Hence, keeping investment and insurance separate is the most prudent way to keep things simple. Moreover, under these FD schemes, there are chances that you might remain underinsured. However, if you still wish to go ahead with these FD schemes, then first make sure that you are adequately insured.