You may come across free life insurance covers being offered with a fixed deposit (FD). However, it is important to note that such insurance policies do not come without conditions and restrictions.
Who are offering such FDs in the market?
DCB Bank Suraksha FD has tied up with Aditya Birla Sun Life to offer a life insurance policy. The policy is available for those between 18 and 54 years, but those who have completed 55 years are not allowed to open Suraksha FD, as per the bank’s website.
Also, note that the life insurance is equivalent to the amount held in the fixed deposit. If you have Rs1 lakh in the FD, the insurance cover is Rs1 lakh. However, there's a cap of Rs 50 lakh.
The interest rate is 6.75 percent on the Suraksha FD for a three-year tenure. Moreover, there is an age restriction and the tenure and also cost attached to it.
On the other hand, ICICI Bank also offers a free life insurance cover of Rs 3 lakh. According to the bank's website, the policy is available for one year if you have opened an FD of Rs 3 lakh or more. Remember, the tenure of the FD should be over two years or more. Those who are in the age group between 18 and 50 can avail this policy. The bank offers the group cover in partnership with ICICI Prudential Life Insurance.
Remember, in both cases, your policy lapses in case of premature withdrawal. In the case of joint accounts, the bank covers the primary holder.
Should you buy such a policy?
Since such policies come with conditions and restrictions, hence you have to understand your requirement. You should not opt for such policies only because it is a free life insurance cover. You should buy such a cover if you would have selected the bank without this cover.
Experts suggest not to rely on life insurance that comes free with financial products like FD or mutual funds. It is better to opt for a term plan that offers a cover of at least 10 times your annual salary. Such additional that are offered free can help to boost the existing coverage of primary life insurance policy.