Which Is Better: Fixed Deposits or Money-Back Policies?

There are various effective ways to invest in order to maintain and grow your money. The most popular options are to invest in a fixed deposit or a Money Back programme. They both offer benefits and drawbacks, but the most important part of the process is determining which benefits the best suit your financial condition and requirements.

Fixed Deposits are offered by banks and non-bank financial institutions (NBFIs). It is a financial product that pays the investor a higher rate of interest until the maturity date. Some banks may also offer loans backed by FD certificates to investors. It's possible that a fixed deposit will entail the opening of a new account. You can do so without having to create a new account.

A Money-Back plan is a life insurance policy featuring a Money-Back option. The life guaranteed receives periodical payouts when a certain amount of time has passed since the plan began. They also receive benefits such as survival, maturity, and death benefits, as well as tax breaks under Section 80C of the Internal Revenue Code of 1961. It provides insurance coverage to protect the life assured. There is minimal to no risk associated with the coverage. It offers supplementary benefits to cover parts of a person's life that the policy does not cover financially.

Money Back Plans vs. Fixed Deposits: What's the Difference?

Fixed deposits and Money Back schemes are both essential in their own right. If you're having trouble deciding which of the two is best for you, consider the following differences:

1. Duration of the policy

Fixed deposits are ideal for long-term and short-term investments, with terms ranging from 1 to 5 years. While Money Back policies provide life insurance as well as premium back options for a minimum policy term of 10 years, fixed deposits are ideal for long-term and short-term investments, with terms ranging from 1 to 5 years.

2. Make An Investment

In the case of Money Back insurance, premiums vary per plan and are determined by characteristics such as age, duration, and other considerations. On the other hand, one can start investing in a fixed deposit with a minimum of Rs. 1,000 and no maximum investment restriction.

3. Investment Return

Money Back guarantees are accompanied by a clearly specified return on investment. Fixed deposits, on the other hand, offer a guaranteed return on investment. On a weekly, quarterly, or annual basis, one might earn interest on their fixed deposit.

4. Withdrawal

Premature withdrawals are authorized after two years of policy tenure in Money Back policies, although partial withdrawals are permissible in fixed deposits.

5. Payout Options

The corpus is received in the form of long-term annual/monthly payments in money back policies. The full corpus might alternatively be taken as a lump sum payout by the policyholder. Fixed deposits, on the other hand, allow the payout amount to be taken in a lump sum at the conclusion of the policy period.

6. Benefits from Taxes

A policyholder in a Money Back policy enjoys tax advantages for the premium paid and the maturity funds received from a life insurance policy under Sections 80C and 10(10D) of the Income Tax Act 1961. Fixed deposits, on the other hand, do not offer any tax advantages. It's worth noting that there are a few tax-benefit fixed deposits available that may be invested in for a 5-year term and provide tax benefits under section 80C.

Conclusion

Two safe investment options for saving and developing your money are a Money Back plan and a fixed deposit. Each one has its own set of benefits. You must invest in a product that is suitable for your financial circumstances and requirements. Money Back programmes, on the other hand, offer additional benefits such as a guaranteed amount and other incentives.

Also read: Reasons To Buy A Money-Back policy

What Really Is A Money Back Policy

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.