Fixed deposit VS life insurance – where should I invest?
There are many financial and insurance products available in the market wherein you can invest and receive higher returns on your investments. Among the products available in the market, fixed deposit (FD) and life insurance (LI) are the two most popularly used investment products. Although life insurance is an insurance product, many people use life insurance as an investment product. On the other hand, fixed deposit is a purely investment product wherein you can invest for varying tenures. However, both life insurance and fixed deposits serve your different needs.
Know about fixed deposit & Life Insurance
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 a given maturity date. But, with prior notification to 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, life insurance is an insurance product which you buy from a particular insurance provider/company by paying a specific amount of money as premiums. A life insurance policy provides an assured amount of sum to a nominated individual upon the death of the insured person. Life insurance policies are normally divided into two types - whole life insurance and term life insurance policies. You can buy these policies for different tenures based on your requirements. Not only these policies provide risk coverage, you can also use these policies to pay off your medical bills, fund children's education and plan for your retirement.
Benefits of investing in fixed deposits
Fixed deposits are savings products offered by banks and you can enjoy a wide range of benefits by investing in them. Mentioned below are some of the major benefits you can enjoy by investing in fixed deposits:
Fixed deposits encourages you to save for a fixed tenures.
It provides you higher interest rates on your savings compared to the interest you receive by investing in a normal savings account.
You can get assured returns on your investments provided you don't withdraw them prematurely.
In case your cash flow squeezes, you can withdraw your fixed deposits to meet your emergency financial needs.
Fixed deposits enable you to choose your interest payment options. You can receive it either at maturity or annually or monthly based on the term you chose.
FD comes with flexible investment tenures. You can choose your investment tenures as per your convenience that normally ranges from 7 days to 10 years.
You can invest in multiple fixed deposit accounts provided you have different goals of investments.
Benefits of buying life insurance
Like fixed deposits, life insurance has its own set of benefits. It comes with the following benefits:
Life insurance policyholders can avail tax benefit under section 80C and 80D of the Indian Income Tax Act, 1961.
Life insurance provides risk coverage and takes care of your near and dear ones even in your absence.
Life insurance coverage lasts for longer duration, more than the premium paying period.
You can choose from a wide range of plans such as term plan, whole life plan, senior citizen plan, retirement plan etc. as per your requirements.
It offers asset protection as well as access to cash.
Fixed Deposit Vs Life Insurance - which is best for you?
Fixed deposit is always a better option to invest 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 life insurance.
Fixed deposit is a purely investment product whereas life insurance is an insurance product. Investment is something that helps you save for the future whereas insurance is something which you purchase for risk protection and protect your family in our absence.
Fixed deposits are best for both short and medium term investments whereas life 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 life insurance plan wherein you need to invest for at least 10 years.
You can invest a minimum amount of Rs. 1000 in bank fixed deposits whereas in case of life insurance, the minimum premium is different for different plans based on the insured individual's age, gender, policy term and premium payment condition.
Fixed deposits offer fixed returns on investments and it is mentioned in the beginning when you open your deposit. But, investment in Unit Linked Life Insurance Plans is subject to market risk. The fund value you receive by investing in these plans are affected by the prevailing market condition.
Fixed deposits add to your habit of savings whereas life insurance plans are purchased out of caring and fear that your near and dear ones may face some risks in future.
Both fixed deposits and life 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 application to regular life insurance and ULIP plans respectively.
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.
FAQs:
Can I get risk coverage with my fixed deposit account?
No, fixed deposit account does not provide risk coverage. But, you can get assured returns on your investments with your FD account.
What is the minimum tenure of investment in a fixed deposit account?
You can invest in a fixed deposit account for a minimum tenure of 7 days.
Can I withdraw my fixed deposits in case I have an urgent financial need?
Yes, you can withdraw your fixed deposits to meet your emergency expenses by giving prior notification to your bank.
Can I get tax benefits by purchasing life insurance?
Yes, you can get tax benefits under section 80C and 80D of the Indian Income Tax Act, 1961 by purchasing life insurance policies.
What is the basic difference between fixed deposit and life insurance?
Fixed deposit is an investment product meant for savings while life insurance is an insurance product primarily designed for risk coverage and savings.
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Fixed deposit VS life insurance – where should I invest? Reviews
I have invested some money as a Fixed deposit in HDFC Bank and the interest rate is not that much great because they are giving interest as compared to others. I have invested the money of Rs. 3L and there is a locking period of 5 years. Its 7% interest rate. If they are increasing the interest rate, it would be fine. Since I do all my transactions with this bank, I have selected same for my FD as well.
I have chosen my fixed deposit scheme from State bank of India because I'm maintaining my salary account with them and they provided rate of interest is fine for me. I have invested the money of Rs. 2.75 lakhs. There is a locking period of 45 days. They are giving interest rate of 4.5%. Overall, I'm satisfied with their services.
I have been investing the money of Rs. 3 lakhs for the fixed deposit. I have selected Kotak mahindra bank for the FD because their net banking facility is very different when i compared to other. I can access everything regarding the account hence its easy to handle the transactions. I'm not sure about the interest rates. 7 months before, i have invested the money.
Its because of the competitive interest rates, i have selected the Fixed deposit in Kotak Mahindra bank. I have invested the fixed deposit 1.5 years ago and there is a lockin period of 5 years. They have invested the amount of Rs. 7.5 % and the employees are helpful in the branch.
I have a Fixed deposit in Axis bank. I have invested the money of Rs. 10000 for two FDs. There is a lockin duration of 1 year. They are giving a interest rate of 7%. Through net banking, i have activated this Fixed deposit. There is no tax benefits available. Axis bank service has been good. Overall, I'm happy about their services.
Since last 15 years, i have a account with Oriental bank of commerce thats the reason i have invested the money in fixed deposit with the same bank. I have invested the amount of Rs. 11 lakhs. They are giving the interest rate of 6.5%. There is no locking period but i have chosen the duration of 1.5 years. There is no additional charges deducted for this fixed deposit.
Interest rate is very low in Indian post office Fixed deposit scheme because they are providing only 8.5%. I have chosen this office because of the child benefits. I have invested the money of Rs. 1.5 years. Its 3 years lock in period. Overall, I'm satisfied with the service provided by post office employees.
I have invested the money in SBI for a fixed deposit and based on my wife recommendation i have chosen it. They are providing the interest rate of 7.25%. They have option to select the lock in period in that i have chosen 5 years. We had visited their branch and the response was good.
Its easy accessible and to redeem so that i have invested the money in Fixed Deposit with HDFC BANK. I have invested the money of Rs. 2.5 lakhs and they have provided me a interest rate of 7.5%. There is no locking period. I didn't got any additional charges till now.
I have paid the money of Rs. 4.5 lakhs as a fixed deposit in the Indian post office. For the safety purpose, i have chosen the post office account. They are offering me a interest rate of 7.9%. There is a lockin period of 5 years. If i withdraw the money in 1 year, they will reduce the interest rate of 2% and after 3 years, its 1%.
Interest rates are less in Central Bank of India so I had taken a fixed deposit. I have invested the money of Rs. 1 lakh in my wife's name. Branch is near from my place so I have chosen this bank. Yearly once, I get the money of Rs. 6,765 for the interest. There is a locking period of 1 year.
I am doing Fixed Deposit with ICICI BANK and its been around 5years. They haven't been paying good interest and its more or less same like other banks as I used to hold my salary account with ICICI, I have decided to be with one bank. There is no locking period and its flexible. They do give good support and the app is user friendly. Even deposit account can be opened through i-mobile or net banking itself.
I had a Fixed Deposit in State Bank of India, I have completed the tenure before 3months ago. I have no issues with the customer service. They are given me 7% interest rate for 2years. There is no profit and processing fee. I got an online access, where I can check the interest rate anytime on the YONO app or else SBI online.
I have invested some money through FD. My salary account is in SBI so i have a zero ATM charges and the limit is not actually set by SBI. They do have short term FDs which is pretty good. I have invested the money of Rs. 60000 and the interest rate is 10.01% for the tenure period of 16 months. There is no lockin period. There is no hassle to getting the money back.
I have invested the money in Dena bank through Fixed deposit and the growth is not that much good. They are not taking any hidden charges. Only because of the Government undertaken bank, i have selected them. They are providing a interest rate of 6% per annum. I have invested the money of Rs. 2 lakhs. There is a lockin period of 1 year.
I have opt for fixed deposit for the tax saving purpose because I have chosen five years tenure with AXIS Bank, still its going on. Only once I Invested my money it has the locking period of five years. I have option to check my transactions through mobile app. But I have concern about the interest rate is very lesser for this FD.
I had fixed deposit with SBI then I withdrawn the amount, I done Rs. 3 lakhs of investment on my daughter name then I taken the liquidity to purchase the land, at the time I struggled a lot to take that money because the process was difficult to withdrawn the money after seven months of tenure.
I had a Fixed Deposit with Union Bank of India and its closed 18 to 19 months due to personal reasons. I am doing investment but my experience is not good with FD account. In my home town, there is no other banks so just decided to go with this bank. The returns are good.
I have one FD with HDFC, I deposited Rs. 1 lakh, I was opt for 45 days of tenure. Finally I got 6.25% of interest for 45 days. It won't cover the tax, if we need tax benefits we should go for five years term. I can track the details through netbanking, on the maturity date the amount credits automatically in the account. Even the notification can customized.
HSBC staff wrongly pre closed my fixed deposit .. and calculated the interest rates wrongly and when asked them for clarification never got back .. even after following up with them repeatedly for more than 3 months.. would highly recommend not using their services.
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A V kumar
, visakhapatnam
Reviewed on Aug 24, 2019
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