You should consider buying a COVID-19 insurance cover that is much more holistic
Perhaps alarmed with falling deposits and loss of customers’ confidence, Yes Bank has held rolled out a new scheme. The bank launched a fixed deposit (FD) product with an insurance cover for COVID-19 illness. It has tied up with Reliance General Insurance for the product. Yes Bank will bear the premium cost for a sum assured of Rs 25,000, in the case of depositors who park sums in excess of Rs 1 lakh. Should you take the bait and is the insurance cover worth it?
What’s the offer?
All investments in excess of Rs 1 lakh, made in Yes Bank FDs for tenures of more than a year will now come with a complimentary COVID-19 insurance cover. The bank is offers an interest rate of up to 7.25 per cent on this fixed deposit. The scheme is open for investment till June 30.
The cover is valid only for the first year, even if you buy a longer term FD. If, during this time, you get diagnosed with COVID-19, you will get a lump-sum amount of Rs 25,000. It is a fixed benefit insurance cover. You would not need to be hospitalised for actual treatment. You can take only one insurance policy cover, even if you invest in many fixed deposits of Yes Bank.
Existing FDs that get renewed will not be eligible for the cover. Only the fresh FDs will be considered for the policy.
Interest rates are higher (up to 7.25 per cent) on the one-year FD when compared to those of other large private-sector banks. ICICI Bank and HDFC Bank offer 5.25 per cent and 5.60 per cent interest rate, respectively, on their one-year FDs. The insurance cover is for free; the bank pays the premium on your behalf.
Those aged between three months and 60 years are eligible for investing in this FD.
Will bundled cover work?
The complementary insurance cover has a waiting period of 15 days. The policy excludes any travel to restricted countries for 45 days preceding the insurance start date, and co-habitation with an existing COVID-19 patient.
The cover is only for the first holder, even in the case of joint accounts. The insurance benefits are also not available to senior citizens, even if they are the first holders.
The cover is valid for a period of one year only and Rs 25,000 cover is inadequate to cover the costs of the COVID-19 treatment.
Yes Bank did not respond to Moneycontrol’s queries on the low cover.
Abhishek Bondia, co-founder and principal officer of SecureNow says, “The insurance cover is extremely insufficient in case of hospitalisation. A day’s charges are Rs 15,000 to Rs 20,000 for COVID-19 treatment. There are additional charges for patients admitted to intensive care units (ICUs) and for using ventilator service.” According to data from the general insurance council, the average claim amount settled for COVID-19 treatment is Rs 2 lakh.
Should you invest?
Depositors became wary about Yes Bank after the RBI imposed restrictions on withdrawals in March. Eventually, a consortium of lenders led by The State Bank of India (SBI) took stakes in Yes Bank and bailed it out. Meanwhile, investors withdrew their deposits in hordes. In 2019-20, the bank’s deposit base fell by 53 per cent. “The bank is looking to shore up its deposit base with a complementary COVID-19 insurance cover,” says Amol Joshi, founder of Plan Rupee Investment Services.
Given the Yes Bank episode and memories of PMC Bank’s woes before that, it is important to research a bank’s credentials before putting your life savings in it. While it’s tough to scrutinise a bank’s financials, it is just safer to stick with larger banks and leading names, instead of going to a bank that offers higher interest rates, with your eyes shut.It is also a good practice to have standalone insurance covers. Says Bondia, “You should consider buying a COVID-19 insurance cover that is much more holistic and has a higher sum assured rather than buying the bundled cover.” You should look at a minimum of Rs 2 lakh as cover for COVID-19 if you are looking to buy a fixed benefit insurance cover. The premium is Rs 2,040 plus taxes while purchasing a separate policy from Reliance General Insurance.