FD Vs. Money-Back Life Insurance Plan
Updated On Aug 03, 2021
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There are many effective ways to invest to save and grow your money. The most popular ways are investing in a fixed deposit or a money-back scheme. They both have their benefits and disadvantages but choosing the benefits that suit your financial state and requirements is the important move of the entire process.
A Fixed Deposit is provided by banks or NBFCs. It is a financial instrument built to offer the investor a higher rate of interest until the maturity age. Some banks may additionally offer loans against FD certificates to the investors. A fixed deposit may require opening a new account. It can be done even without opening a new account.
A money-back plan is a life insurance plan. The life assured receives regular payouts after a certain amount of time of the beginning of the plan. They also receive benefits like survival benefits, maturity benefits, death benefits, and tax benefits under section 80C of the Income Tax Act, 1961. It provides insurance cover to the life assured. There is little to no risk in the policy. It offers additional bonuses to cover the parts of a life that are not financially covered through the policy.
Benefits of a Money-Back Plan
The benefits that come with a money-back plan are listed below -
If the life assured reaches certain age-related milestones during the term of the policy, they receive an amount called the survival benefit. This is to celebrate the survival of the life assured throughout the term of the policy.
If the life assured suddenly passes away, the nominee of the policy will receive a benefit to cover their upcoming expenditures called the death benefit. It is helpful to cover the immediate expenditure of the family after the demise of the life assured.
After the policy reaches the maturity age, the life assured receives a benefit called the maturity benefit along with other applicable bonuses. This is often used to invest in a pre-planned major event in the life of the policyholder.
This policy can avail of the tax benefits under section 80C of the Income Tax Act, 1961.
Benefits of a Fixed Deposit (FD)
Some benefits that come along with a fixed deposit are listed below -
- The market fluctuations do not affect the returns on your deposit. These returns are fixed.
- The interest rates offered by banks are lower than those offered by the NBFCs.
- The deposits are easily renewed. On renewing your deposits, you can get additional rate benefits.
- Tax benefits are applicable to this investment option. The tax benefits are applicable under the Income Tax Act, 1961.
- It offers high stability and is considered one of the safest investment options.
- The returns of a fixed deposit are assured.
- The risk factor is negligible.
- Greater safety of your deposits is ensured as there is no effect of the market fluctuations on your deposits.
- Senior citizens can avail themselves of higher interest rates through some financers.
A money-back plan and a fixed deposit are safe ways to invest to save and grow your money. They each have their benefits. You must choose an instrument to invest in based on your financial stability and requirements. However, money-back plans provide better benefits as they come with sum assured and other benefits.
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.