Which Is Better: Fixed Deposits or Money-Back?
Updated On Jun 10, 2022
Table of Contents
Fixed-deposit is a popular investment option in which a sum of amount is deposited in the bank for a fixed pre-decided time period at a fixed interest rate that is provided by the bank to the depositor after the maturity date of the Fixed-Deposit.
On the other hand, Money-Back plans are a type of life insurance policies that assure the life of the person in whose name the plan has been taken up along with helping them accumulate an assured sum of money. Under this policy,when a specified time elapses, the person gets monthly benefits such as survival benefits,maturity and also death benefits i.e. the life of the person is insured under this plan.
Which Is Better: Fixed Deposits Or Money-Back Policies
Some of the distinctions between fixed deposits and money-back policies which provide them an edge over each other in different situations have been listed below:
1.Investment Durations
Fixed-Deposits is a better term plan since the investments in FDs ranges from short-term to long-term investments i.e., it can range from one to five year according to the wish of the depositor whereas on the other hand money-back policies need to have an investment for at least 10 years minimum to be applicable to avail the life-insurance and premium back options.
2. Returns
The returns on investments in money-back plans is a guaranteed return based on the policy taken up by the insurer i.e., after a specified term is elapsed, a survival benefit and a regular payout is provided to the insurer and in case of death,death benefits is given to the nominee and the family of the insurer so money-back plans provide a guarantee of helping the insurer during the life and also after the death of the insurer.
Whereas fixed-deposits provide guaranteed return on investment and receive interest on a weekly,quarterly or yearly basis too.
3. Withdrawal
Money Back plans allow the withdrawal of the investment after the completion of the term plan depending on the plan taken up by the individual.
In fixed deposits , withdrawal after maturity fetches you benefits such as interest is earned and if withdrawal is made before maturity then you would receive the full lump sum amount but loose out on the interest that you might have earned if the tenure would have been completed.
4. Payment Options
The amount is received in the form of annual/monthly payments in a money-back plan and the policyholder may also withdraw the full investment as a lump sum payout.
On the other hand, in FDs, the whole payment can only be received after the maturity of the policy in one single sum and if you wish to withdraw the amount before the maturity you might lose the interest that was to be added to the principal amount .
5. Tax Benefits
Money-Back policy enjoys tax advantages for the premium paid and the maturity funds received from a life insurance policy under Sections 80C of the Income Tax Act of 1961 .
FDs do not provide any tax benefit but there are some tax-advantaged fixed deposits that can be kept for up to five years and give tax benefits under Section 80C.
Conclusion
A Money Back plan and a fixed deposit both are quite secured investment alternatives for saving and growing your money. The investments in these plans have less risks but these investments should be done judiciously based on your financial situation and needs.
Also Read: Are Money-Back Policies Right For You
