Should I Choose A Money Back Plan Or An FD?
Updated On Jan 05, 2022
Table of Contents
There are several efficient strategies to preserve and expand your money through investing. Investing in a fixed deposit or a Money Back program are the most popular options. Banks and non-bank financial institutions (NBFCs) provide Fixed Deposits. It is a financial product designed to provide a greater rate of interest to the investor until the maturity date. Some banks may also provide investors with loans secured by FD certificates. A fixed deposit may necessitate the creation of a new account. It is possible to do so without creating a new account.
A life insurance plan with a Money Back option is known as a Money Back plan. After a set length of time has passed since the plan began, the life guaranteed gets regular payouts. They also get benefits such as survival, maturity, and death benefits, as well as tax advantages under Section 80C of the Income Tax Act of 1961. It protects the life assured by providing insurance coverage. The coverage carries little to no risk. It provides additional benefits to cover the aspects of a person's life that are not covered monetarily by the policy.
Differences Between Money Back Plans & Fixed Deposit
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:
- Term 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.
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.
- Return on Investment
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.
Premature withdrawals are authorized after two years of policy tenure in money back policies, although partial withdrawals are permissible in fixed deposits.
- Options for Payment
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.
- 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.
A Money Back plan and a fixed deposit are two secure investment options for saving and growing your money. Each has its own set of advantages. You must invest in an instrument that is appropriate for your financial situation and needs. Money Back plans, on the other hand, provide more rewards, such as a guaranteed sum and other perks.
Also read - Is A Money Back Plan Worth Investing In?
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.