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Term Insurance Or Fixed Deposits? Which Is A Better Investment Option?

Updated On Aug 25, 2021

Fixed deposits are investment products. You can invest in fixed deposits for fixed tenures as per your convenience and get attractive returns on your investments at maturity. Normally, banks do not allow you to withdraw your deposits before the given maturity date. But, with prior notification to the bank, you can withdraw your fixed deposits. These deposits allow you to invest for a minimum period of 7 days to a maximum period of 10 years.

On the other hand, term insurance is an insurance product which you buy from a particular insurance provider/company by paying a specific amount of money as premiums. A term insurance policy provides an assured amount of sum to a nominated individual upon the death of the insured person. Term insurance policies are normally divided into two types - whole term insurance and term insurance policies. You can buy these policies for different tenures based on your requirements. Not only do these policies provide risk coverage, but you can also use these policies to pay off your medical bills, fund children's education, and plan for your retirement.

Fixed Deposit Vs Term Insurance - Which Is Better For You?

Fixed deposit is always a better option to invest in as it is purely designed for your investment and savings-related needs. If your intention is to save and invest for the future, it is advisable you invest in fixed deposits. Listed below are some of the major differences between fixed deposits and term insurance.

  • Purpose Of Buying

Fixed deposit is a pure investment product whereas term insurance is an insurance product. Investment is something that helps you save for the future whereas term insurance is something which you purchase for risk protection and to protect your family in our absence.

  • Term Period

Fixed deposits are best for both short and medium-term investments whereas term insurance plans are designed for long-term investments. You can invest for a period of as low as 7 days in fixed deposits unlike a term insurance plan wherein you need to invest for at least 10 years.

  • Premiums

You can invest a minimum amount of Rs. 1000 in bank fixed deposits whereas, in the case of term insurance, the minimum premium is different for different plans based on the insured individual's age, gender, policy term, and premium payment condition.

Also readShould I Purchase Term Insurance Even If I Don't Have Any Dependents?

  • Return Value

Fixed deposits offer fixed returns on investments and it is mentioned in the beginning when you open your deposit. But, investment in term insurance plans is subject to market risk. The fund value you receive by investing in these plans is affected by the prevailing market condition.

  • Withdrawal

Both fixed deposits and term insurance policies can be withdrawn. You can withdraw your fixed deposits at any time by sending a notification to your concerned bank whereas a lock-in period of 3 and 5 years is applied to regular term insurance.

Take Away

Even if you don't get any tax benefit for investing in fixed deposits, it is an ideal product to invest in if you want to get fixed returns on your investments. So, if you want to earn on a regular basis, a fixed deposit account can be the perfect choice. Invest in fixed deposits and get income in the form of interest. Fixed deposit is the most preferred choice of investment among senior citizens.

You may also like to read - Health Insurance Plans V/S Term Insurance Plans

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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