Fixed Deposits With Health Insurance: Are The Added Benefits Worth Your Money?
Fixed Deposits (FDs) have long been a favoured investment choice for individuals in India due to their safety and guaranteed returns. However, with interest rates on FDs declining in recent years, banks have started offering additional perks to make these products more appealing. One such feature is the inclusion of health insurance benefits with FDs, a unique proposition aimed at adding value to an already safe investment. But are these offers worth your attention? Let’s take a closer look at the details and see whether combining health insurance with fixed deposits is a smart move.
What are Fixed Deposits with Health Insurance Benefits?
In an effort to attract more investors, many banks have partnered with insurance companies to offer health coverage alongside their FD schemes. These health insurance benefits can range from critical illness coverage to outpatient department (OPD) consultations and pharmacy expenses. For example, some banks offer FD plans that provide a health cover of up to ₹2 lakh for critical illnesses, while others include COVID-19 cover. The idea is to enhance the value of a standard FD by addressing health-related concerns, which are increasingly on people’s minds.
However, while the concept seems appealing on the surface, it’s essential to scrutinise the details before making a decision.
Key Features of These Plans
Though the added health insurance benefits sound promising, these schemes largely mirror the same features as regular FD plans. Here are some of the key points to consider
- Interest Rates Remain the Same: The interest rates offered on these fixed deposits with health benefits are identical to those of regular FDs. This means there is no extra financial incentive in terms of returns on your investment. For example, if a bank is offering a standard interest rate of 5.5% per annum for a two-year FD, the same rate will apply to the FD with health insurance benefits.
- Limited Tenure and Coverage: The tenure of these schemes typically aligns with the term of a traditional FD, often ranging from one to two years. Consequently, the health insurance benefits only last for the duration of the fixed deposit, limiting the long-term usefulness of the coverage. Moreover, these schemes offer limited health insurance coverage, generally capping benefits at around ₹1-2 lakh. This may be insufficient in the event of a significant medical emergency.
- Coverage Restrictions: Not all aspects of healthcare are covered by these plans. Some schemes only cover critical illnesses, while others focus on pharmacy costs or OPD consultations. Therefore, depending on the bank and the plan, the coverage you receive could be highly restricted. Furthermore, age restrictions apply to many of these policies. For example, ICICI Bank’s FD with critical illness cover requires depositors to be under 50 years of age, while DCB Bank’s FD and health insurance plan extends the limit to 70 years.
- Exclusivity for Senior Citizens: A significant number of these FD-plus-health-insurance schemes are geared toward senior citizens, recognising their greater need for health coverage in later life. However, this means the benefits might not be suitable for younger investors who already have comprehensive health insurance in place.
- Coverage Only for the First Depositor: In joint FDs, health insurance coverage is often extended only to the first depositor, leaving other account holders without the same benefits. This limitation may be particularly problematic for families or couples planning to use these schemes.
Despite the appeal of combining health insurance with a traditional savings vehicle, these schemes have several notable downsides. Firstly, the health insurance cover provided is minimal and may not suffice for significant health problems. Comprehensive health insurance plans offer broader and more reliable coverage, and relying on an FD for health security could leave you exposed.
Secondly, fixed deposits are illiquid by nature. Should you need to break the FD before its maturity to access your funds, you may lose both the interest and the accompanying health insurance benefits. Additionally, many of these schemes may not align well with your financial goals or health needs, particularly if you’re already covered under a robust health insurance policy.
Lastly, these plans should not be seen as substitutes for full-fledged health insurance. While the insurance cover might seem like a bonus, it is limited and short-term. Relying solely on the insurance provided through such FD schemes could leave you financially vulnerable in the event of a serious health issue.
Should You Opt for These Plans?
Whether you should invest in an FD that comes with health insurance benefits depends on several factors, including your current health insurance status, financial needs, and investment goals. If you already have a comprehensive health insurance policy, adding an FD with limited health benefits may not make much sense. On the other hand, if you’re a senior citizen looking for a short-term health cover alongside your savings, these schemes may offer a small additional safety net.
Before committing to such a scheme, it is essential to read all the terms and conditions carefully. Ensure that the health insurance benefits align with your needs and that the fixed deposit itself fits within your broader financial plan.
While FDs with health insurance benefits offer a novel way to enhance your investment, they are not a replacement for comprehensive health insurance. The health cover provided is limited in both tenure and scope, making these schemes suitable only for specific situations. For most investors, a standard FD combined with a full-fledged health insurance plan would be a more prudent approach. Ultimately, it is essential to evaluate your personal financial and health needs before choosing such a plan.