Are ULIPs Better Than Fixed Deposits?
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Unit-Linked Insurance Plans (ULIPs) and Fixed Deposits (FDs) are two of the most common savings instruments. It is important to take care of your savings from an early age in order to live a financially stable life in the future. They both provide returns in their own ways and can help you stay away from debts and any other financial crises.
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ULIPs and FDs have their own distinctive features. To know which one is better, it is best to know all about them and about their benefits. Read on to find the difference between these two types of savings plan, in order to ultimately judge which, one is the better option.
Difference Between ULIPs and Fixed Deposits (FDs)
Take a look at the various points of difference between ULIPs and FDs.
|
Parameters of Difference |
ULIPs |
FDs |
|
Key Offerings |
Dual benefits of investment as well as insurance |
Purely an investment and savings option with no insurance cover |
|
Returns |
Depends on the market performance of the investment fund of the policyholder’s choice |
Depends on the fixed interest rate that is given by the bank depending on the tenure of your deposit and the amount |
|
Life Cover and Death Benefits |
Available as a part of the insurance component available with ULIPs |
Not available as there are no insurance options in fixed deposits |
|
Fund Switching |
Available. You can switch over from one fund to another and there are no taxes levied on this switch |
No such option is available in Fixed Deposits. Once you invest your money, it is to stay deposited at the same place. |
|
Tax Benefits |
Applicable to your premium amount (Section 80C of the Income Tax Act) and your maturity amount (Section 10D) |
Available only on the amount that you invested and not on the returns you will receive |
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Final Verdict: Are ULIPs Better Than FDs?
ULIPs might in fact be better than FDs. With a ULIP, you gain dual benefits- not only do you get an investment avenue but also insurance cover. Fixed deposits may have high-interest rates, but ULIPs provide more benefits in a single plan. Moreover, the tax benefits available with ULIPs are also more and they help your wealth grow efficiently.
