Term Insurance - Better Than FD?

Life insurance protects the insured's family financially in the event of the policyholder's untimely death. It helps the insured's family achieve long- and short-term financial goals in addition to providing insurance coverage to the insured's family.

Money-back plans and endowment plans are among the investing options available in life insurance plans. Money-back plans give income at regular periods in addition to the death benefit, whereas endowment plans provide a lump-sum payment as a maturity benefit. In addition, most life insurance policies include guaranteed payouts as well as a bonus.

A fixed deposit is a banking product in which you deposit a set amount of money for a set period of time and receive interest at the rate set by the bank at the start of the period.
FDs are preferable for both short and long-term investments. Only long-term investing plans are appropriate for life insurance. A life insurance plan must be invested for at least 10 years. A FD plan requires a minimum deposit of Rs. 1,000. In a life insurance plan, the minimum period varies.

Life insurance is an insurance product, whereas a fixed deposit is merely an investment. Investments help you save for the future, whereas insurance is something you buy to safeguard your family in the event that we are unable to do so.

• Investment Amount

Fixed deposit investments can be made with as low as Rs 1,000. The maximum investment is unrestricted.

The bank calculates the interest on a quarterly basis, based on the amount of money invested.

A life insurance policy's premium, on the other hand, fluctuates depending on the plan and is determined by a number of criteria like the policyholder's age, the policy's value, the insured's health, and so on. At the end of a monthly income plan or a guaranteed return plan, you can receive investment returns as a maturity benefit.

Must Read: Understanding The Many Benefits of PPF Account

• Withdrawal

Fixed deposit plans are partially revocable. Breaking an FD account before it matures, on the other hand, has an impact on the interest rate on the investment, resulting in a low return on investment. Some banks charge a fee if you withdraw before the end of the period.

After the three-year lock-in term on a life insurance policy has elapsed, you can make a withdrawal.

• Benefits of Taxation

Section 80 C of the Internal Revenue Code
allows you to deduct life insurance premiums from your taxable income. The act's Section 10D also provides tax benefits. If the premium paid for a life insurance plan is less than 10% of the sum assured or the sum assured is at least 10 times the premium, the income on maturity becomes tax-free.

There are also 5-year FDs that qualify for tax benefits under section 80 C.

• Returns

Fixed Deposits offer a guaranteed return on investment, which is disclosed at the time the account is opened.

A life insurance plan with a monthly income plan offers you a guaranteed and continuous stream of income.

Conclusion

Traditional Indian knowledge suggests that saving is the most important aspect of money management. For many years, fixed deposits have been India's preferred investment vehicle. Life insurance, on the other hand, is suitable for providing financial security after a policyholder's death.

These two goods should not be compared because they serve very different functions. The first is a savings product, and the second is an insurance policy.

Also Read: Which Is Better For Investment? Recurring Deposit Or Fixed Deposit?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.