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Life Insurance or Fixed Deposits? Which Is Better?

Published On Aug 08, 2021 6:40 PM By Shrida Gulati

Fixed Deposits are purely an investment tool, wherein you can invest in fixed deposits for fixed term as per your convenience, you get return on investment at maturity. Usually under fixed deposits banks don’t allow withdrawals before maturity but you make withdrawals before maturity after notifying the bank in advance. Under fixed deposits you can invest for a minimum of 7 days and a maximum of 10 years.

Life insurance policy provides life cover as the name suggests, in case the life assured passes away during the policy term, the nominee shall receive the death benefit. There are 7 types of life insurance policies, namely Term life, child life, retirement, endowment, money back, ULIP and whole life insurance policies. You can choose a life insurance policy based on your requirements. Life insurance policies not only provide risk cover but you can also use it as an investment in the long run.

Benefit of Investing in Life Insurance

Below mentioned are the benefits of investing in a life insurance policy: 

  • Life insurance provides risk coverage, in case of an unforeseen event such as untimely demise of life assured during the policy term, the nominee will receive death benefit. This way you can ensure financial stability of your near and dear ones in your absence. 
  • Usually life coverage time periods last longer, more than the premium payment term.
  • You have flexibility to choose from a wide range of life insurance products such as term insurance, endowment, ULIP, money back, retirement, child life plan etc., according to your coverage requirements.
  • Life insurance ensures your peace of mind, you need not worry about the financial security of your family.
  • Under life insurance you can avail tax exemptions under Section 80C and 10(10D) of the Income Tax Act. 

Benefits of Investing in Fixed Deposit

Fixed deposits are a investment tool provided by the banks and mentioned below are the benefits of investing in a fixed deposit:

  • Fixed deposits lets you invest your money for a fixed period of time.
  • When you choose to invest in fixed deposits you shall receive a higher rate of interest on your investment as compared to a normal savings account. 
  • If you do not withdraw your investment before the maturity date the returns on investment will be higher.
  • In case of financial emergency you can withdraw your fixed deposits to meet your immediate financial needs.
  • You can choose to receive interest payment at the time of maturity or annually/monthly basis based on the term. 
  • You can choose to invest in multiple fixed deposit accounts as per your financial needs.

Life Insurance or Fixed Deposits? Which Is Better ?

Fixed deposit is an investment tool whereas life insurance provides life cover. Fixed deposits will help you grow your corpus for future, on the other hand life insurance is something which provides you risk cover and provides financial stability to your family in your absence. If you are looking to invest your money for high returns then you must opt for fixed deposits. 

Also read - Fixed Deposit V/S Life Insurance---- Where Should I Invest?

SIP V/S ULIP- Which is better investment option?

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.

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