I say banks in plural because more than one bank that I have patronized has made the same offer over the last few years.
As I look at today’s offering, I see the following key points:
“$1000 of insurance coverage at no cost to you whatsoever. We pay the premiums.”
“Just fill out and return the enclosed form.”
Surely, $1000 of life insurance has got to be dirt cheap, but I want to know why do banks bother with this? What do they get out of it? Why would two totally unrelated banks (credit union vs. huge mega bank) both offer the same deal, a few years apart?
Because it looks like they are giving you 1,000 and they are probably paying next to nothing for it. Why do banks give away “George Foreman Grills.” It’s cheap and people want something.
I was looking to put about 50,000 in an account. The best I could get (without a CD or otherwise tieing(sp?) my money up was 0.005% (One half of one percent). For that I would rather bury it in the back yard. Eventually I fould a bank that gave me that rate PLUS Airline Miles at 10% of my account per month. Or 5,000 miles every month). That costs the bank about 90.00 at the going industry rate of 1.8¢ per ailine point.
Without that airline points, frankly at 1/2 of one percent I’d rather bury the money in the backyard rather than let a bank use it.
The bank’s premium for the 1,000 of life insurance is probably about .15 to .20 per person, or maybe less. Our company pays .20 per $1,000 unit for group term life and we only have 420 lives.
The other consideration is that if you die and owe them some money they may get first crack at what you owe them from that life insurance and don’t have to go to the hassle of holding or claiming part of your bank balance.
My bank offered me the $1,000 free life insurance so I sent the thing in to activate it. In the three weeks since, I’ve gotten three offers to increase the coverage amount. They really try hard to get you to upgrade. Also, I think NevarMore’s suggestion probably holds true.