Compare & Buy Car, Bike and Health Insurance Online - InsuranceDekho
Claim, renew, manage & moreLogin
Hurry Up!
Save upto ₹54,600 in taxes under 80C & 80D. Buy a term insurance plan now!
View Plans

Life Insurance Or FD: Which Is The Better Choice For Me?

Updated On Oct 01, 2021

If you want to look into investing possibilities, the market has a wide range of financial products to choose from. Fixed deposits and life insurance plans are two types of financial vehicles that offer significant returns. They're also well-known financial products that most people are familiar with. Despite the fact that life insurance is an insurance product, many people use it as an investment vehicle. Fixed deposit, on the other hand, is an insurance policy that allows you to invest for varied periods of time. If you're trying to figure out whether one is the superior investment option, keep reading to learn more.

Why Should You Invest in Life Insurance?

Life insurance plans come with several appealing features. Tax benefits are available on fixed deposits under Sections 80C and 80D of the Income Tax Act of India 1961. The life insurance plan provides risk coverage to the family's dependents in the case of the policyholder's death. The life insurance policy's coverage extends long beyond the term for which the payment is paid. Term insurance plans, whole life insurance plans, retirement plans, senior citizen plans, and other forms of life insurance plans are available.

Why Should You Invest in Fixed Deposits?

Fixed deposit schemes are offered by banks and other financial institutions, and you can benefit from them in a variety of ways. When compared to savings accounts, FDs offer larger yields. The returns are guaranteed, and you can take money out early if you have unexpected requirements or emergencies. The interest earned can be claimed monthly, annually, or at the investment's maturity. You can invest for a period of seven days to ten years.

Life Insurance Vs Fixed Deposits

Some of the significant distinctions between fixed deposits and life insurance are listed below.

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

  • Ideal For - Fixed deposits encourage you to save, but life insurance plans are obtained out of concern for your loved ones and a fear that they may encounter difficulties in the future.

  • Tenure - Short and medium-term investments can be made with fixed deposits, while long-term investments can be made using life insurance policies. In contrast to a life insurance plan, where you must contribute for at least 10 years, you can invest in fixed deposits for as little as 7 days.

  • Investments - In bank fixed deposits, you can invest a minimum of Rs. 1000; however, in life insurance, the minimum premium varies depending on the covered individual's age, gender, policy duration, and premium payment condition.

  • Returns - Fixed deposits provide predictable returns on investments, as stated at the outset when you start your account. Unit Linked Life Insurance Plans, on the other hand, are vulnerable to market risk. The value of the funds you get as a result of investing in these plans is influenced by market conditions.

  • Policy Withdrawal - It is possible to withdraw both fixed deposits and life insurance plans. Fixed deposits can be withdrawn at any time by sending a notification to your bank, whereas normal life insurance and ULIP policies have a lock-in period of 3 and 5 years, respectively.

Which Is The Better Choice For You?

If you want guaranteed returns, a savings account is a decent choice; however, you won't get any tax benefits. Moreover, if you expect regular income from your investment, an FD is a superior solution. It is also the finest option for the elderly. When it comes to risk coverage, a life insurance policy is a solid option. According to your needs, you can choose from a variety of plans such as term plans, whole life plans, retirement plans, and so on. It provides both asset protection and cash availability. Both instruments are used for various purposes. Therefore, you should base your decision on your personal and professional requirements.

Also read: 

Term Insurance Or FD, Which Is A Better Option?

5 Best Long Term Investment Options In India

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.        

Popularly Opted Term Insurance Sum Assured

People Also Read

Must BuyMust Buy

Why to Buy Life Insurance Policy Online from InsuranceDekho

  • Tax benefit upto 1,50,000*
  • Claim support everyday 10AM-7PM
  • 66 Lacs+ happy customers