YES Bank has recently launched a new fixed deposit (FD) product bundled with a health insurance cover for COVID-19 illness. The bank has tied up with Reliance General Insurance to offer this FD plus COVID 19 cover.
In a release, YES Bank said that it will bear the premium cost for a sum assured of Rs 25,000, in the case of depositors who will invest Rs 1 lakh in this FD. Thus, in a situation like this should you invest in such FD and is the COVID insurance cover worth it?
What the YES Bank FD is offering you
Currently, the offer to book this bundled YES Banks FD is for a limited period, that is, till June 30, 2020. However, before investing in this FD, take a look at the following three-points:
1. To get COVID-19 cover, you need to invest a minimum of Rs 1 lakh in YES Bank’s FD. Also, you get only one health insurance policy of Rs 25,000 sum insured even if you book multiple FDs.
Amol Joshi, Founder, Plan Rupee Investment Services said that the sum insured has been capped at Rs 25,000 irrespective of the number and total amount of fixed deposits opened during the offer period. “In case of joint fixed deposits, only the primary depositor will be covered under the policy, said Joshi.
2. If we compare YES Bank’s FD interest rates with those offered by other large private-sector banks such as ICICI Bank and HDFC Bank, YES Bank is offering a higher interest rate of up to 7.25 per cent on one-year FDs. In comparison, ICICI Bank and HDFC Bank are currently offering 5.55 per cent and 5.60 per cent interest rates, respectively, on their one-year FDs.
Suresh Sadagopan, Founder, Ladder7 Financial Advisories said that this cover may be useful for those who do not have medical insurance and are worried about the current health crisis. “However, you should not get sidetracked by a free COVID cover. The important thing is that you should evaluate whether the YES Bank FD is inherently good, the risk here is acceptable and whether you would like to invest at least Rs 1 lakh,” Sadagopan added.
3. The depositors should remember that the COVID-19 cover is valid for one year from the opening of the FD having tenure of 1 year and above. The policy is available only for primary holders of the FD who are less than 60 years of age. This clearly excludes senior citizens from the cover.
The exclusions under the free COVID-19 policy: The COVID-19 policy offered with YES Bank FD comes with a waiting period of 15 days. Country specific restriction has been imposed for making policy claims. Basically, the policy excludes any travel to restricted countries for 45 days preceding the policy start date. No claim will be payable if the insured person was living with and sharing the same address as that of person(s) who were diagnosed with COVID-19 or quarantined at the time of proposal. Self-quarantine is also not covered, according to the Reliance General Insurance’s COVID-19 policy document.
Apart from this, any pre-existing condition whether declared or not declared is not covered. If the testing is done at a diagnostic centre other than the ones authorised by the Union Health Ministry of India, the claim will not be payable under this policy.
Should you invest in the FD?
YES Bank is likely to be offering the higher interest rate on its FDs and a bundled COVID-19 insurance to attract depositors back but here is what experts have to say:
Prableen Bajpai, Founder & Managing Partner, Finfix Research & Analytics said that the first thing to remember is that a health insurance policy cover should be according to the policy buyer’s requirements after due consideration of all aspects. “Even if we see this offer as an additional cover for COVID-19, the amount of Rs 25,000 will be insufficient in case of hospitalisation. This cover is being primarily offered to encourage depositors to book a fixed deposit. If you were planning to deposit money in a fixed deposit irrespective of this offer, it can be seen as an additional token benefit, but it shouldn’t be the reason for booking an FD,” Bajpai said.
This simply means that a bundled COVID-19 health cover should never be the sole reason for choosing a fixed deposit option.
Also, you must scrutinise a bank’s financial condition before investing monies. However, if you are unable to do so, then it is better to stick with larger banks and leading names, instead of going with a smaller bank that offers higher interest rates.
Mrin Agarwal, Founder Director, Finsafe said, “You must know that irrespective of making investments in number of FDs, only Rs 25,000 health cover is being provided which is very low given the cost of treatment of COVID-19. Further, the bank will not help with the claims process.” She further said, “The bank is giving a much higher rate on FD as compared to other private banks and the product is being used to attract fresh deposits at this time. Given the health of the bank and the small cover being provided, I would not recommend this product.”
What you should do
One should never mix investment with insurance. Naveen Kukreja, CEO & Co-founder, Paisabazaar said, “You should separate insurance from investment and those without adequate health insurance cover should buy a regular health insurance policy.”
The Insurance Regulatory and Development Authority of India (IRDAI) has also announced that all health insurance policies covering hospitalisation costs will also cover hospitalisation costs of treatment for COVID-19 infection
This way, a typical indemnity health insurance policy will also cover COVID-19 related hospitalisation. Hence, no specific COVID-19 cover might be required. “If one does not have a health cover to start with, the need of the hour is to get such cover, especially floater cover for the family. This is because the hospitalisation expense is likely to be more than Rs 25,000 cover offered with YES Bank’s FD,” Joshi said.