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Comparison Between LIC and Recurring Deposit

LIC and RD are two different investments plans designed to cater to different needs. Though both are investment plans, LIC caters more to insurance while RD is purely a savings scheme.

Definitions

  • LIC stands for LIC Insurance Corporation. An LIC policy is a life insurance policy that you can take against risks. For people who are the head of the household or need to ensure that there is a financial provision for their loved ones after their death, an LIC Policy is a good option.
  • RD is a Recurring Deposit which can be opened with any bank provided you hold a savings or current account with the bank. This is purely a savings scheme where you can earn interest. It does not provide any other benefits.

Life Insurance Corporation Policy

Life Insurance is a contract that you draw out with a company to pay premiums towards a policy. The premiums are determined based on the policy you choose, the tenure and your age. This policy is beneficial at the time of maturity as you will receive a lump sum of money at maturity value. The policy will also pay out in the event of the insured’s death or on any of the events that you are insured against. The main payout dates are:

  • Upon unfortunate death of the insured
  • When the policy matures
  • Any specified dates mentioned in the policy

LIC policies are not suitable to everyone. It is a good policy in case you have dependents. As a breadwinner, you would worry about your family members, spouse and loved ones if anything were to happen to you. If you have a life insurance policy, your nominee will receive either a lump sum or a monthly income to help them cope financially. In the event the policy matures before death, then it turns into an investment that you benefit from after saving for so many years. Some important points to remember about LIC policies are listed below.

  • LIC policies are suitable for people who have dependants.
  • Anyone who is of legal age can avail of a policy.
  • Taking out an LIC Policy is a long-term commitment.
  • Cancellation of policies will result in penalties and might be a loss.
  • With Life Insurance plans, policyholders can opt to save money in systematic plans to meet the costs of important life events such as having children, their marriage and education, and so on.
  • Policies can be taken for your spouse and children as well.
  • LIC policies should be treated as insurance rather than savings.
  • Policies under the “with profit” scheme can be extremely profitable if the market performs well. The premiums payable are usually higher, but these participating policies can share in the profits of the fund, if any.
  • An LIC Policy can be offered as collateral to avail of a loan.
  • Premiums paid towards LIC are eligible for tax deductions.

Recurring Deposit

An RD is a savings scheme offered by banks to help individuals save regularly and systematically build up a fund. The amount saved earns interest, but the interest is not eligible for tax deductions.

  • Recurring deposits can be started with as little as Rs. 10. This depends on the limits set by the bank.
  • The minimum period for an RD is usually 6 months.
  • The maximum period offered by banks is 10 years.
  • The interest rates offered on these deposits vary between banks. You should check the bank’s interest chart before opting for a tenure. Banks usually offer higher interest rates on certain tenures such as 500 days. So going for the longest tenure doesn’t necessarily fetch you a higher rate of interest. Although, with a long tenure you will earn more interest overall.
  • Withdrawals are usually not allowed.
  • You can close the deposit prematurely.
  • Banks run different RD schemes with flexible investment options to cater to different needs of the people.
  • TDS will be applicable on the interest earned on an RD. If you’re interest is lower than Rs. 10,000 in a year, then TDS is not applicable.
  • The interest earned is taxable income and should be declared in the income tax declaration.

Points

LIC

RD

Scheme

Insurance

Investment

Purpose

Risk Protection

Savings

Risk

Safe

Safe

Target audience

Caters to those who have dependents

Caters to everyone

Tenure

Flexible

10 years

Premature closure

Premature closure allowed with penalties.

Premature closure allowed

Loan

Loan facility available

Loan facility available

Tax deductions

Eligible for tax deductions

Tax deducted at source if collective interest earned is more than Rs. 10,000. Interest earned must be declared.

Read More Article on Recurring Deposit

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Recurring Deposit by Banks
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Customer Reviews

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  • HDFC Bank Recurring Deposit
    "Improvement needed on their application"
    HDFC BANK
    0.5 3.5/5 "Pretty good"
    I am very new to HDFC BANK interms of Recurring deposit and its been a first time around 2 to 3months. The helpline number is 24/7 but I did not get response on time. It was a toll free number. The interest rate is nominal. There is no locking period and the application is user friendly but it should be better when compared to ICICI.
    Was this review helpful? 0
    , nasik
    Reviewed on Oct 15, 2019
  • ICICI Bank
    ICICI Bank Recurring Deposit
    "It could be better interms of percentage"
    ICICI BANK
    0.5 4.0/5 "Great!"
    I have started my recurring deposit in ICICI BANK because it was my salary account. I could manage this account online. It would be great, if they could provide connectivity to reach the customer care easily. The interest rate is around 6-7% which is similar like other banks.
    Was this review helpful? 0
    , nasik
    Reviewed on Oct 15, 2019
  • HDFC Bank Recurring Deposit
    "Easy to apply"
    HDFC BANK
    0.5 4.0/5 "Great!"
    I was paying the RD of Rs. 2000 and i started paying the first month amount by last month. In net banking, there is no option to pay my RD. I have chosen HDFC because I'm the account holder of the same account. There is a lockin period of 6 months and at the end of six month it will get converted into fixed deposit. Interest rate is too low.
    Was this review helpful? 2
    , hyderabad
    Reviewed on Oct 10, 2019
  • review Recurring Deposit
    "It's better"
    STANDARD CHARTERED BANK
    0.5 3.0/5 "Satisfactory"
    With Standard Chartered Bank, am having a recurring deposit because they are providing 7% interest rate. I would suggest them to improve the service. Its been more than 1.5years. They have provided me online access to manage the account. I was doing 3K monthly and have chosen tenure of 1year.
    Was this review helpful? 0
    , bangalore
    Reviewed on Oct 10, 2019
  • Kotak Recurring Deposit
    "Need improvement on customer support"
    KOTAK MAHINDRA BANK
    0.5 4.0/5 "Great!"
    I am not getting any calls from Kotak to suggest the investment products but whenever my salary credits I used to invest the money with their recurring deposit, monthly I used to invest Rs.1000 and above . I won't recommend this RD for non customers.
    Was this review helpful? 1
    , bangalore
    Reviewed on Sep 14, 2019
  • HDFC Bank Recurring Deposit
    "Good bank for future"
    HDFC BANK
    0.5 5.0/5 "Blown Away!"
    HDFC gave me very good interest for my recurring deposit, every month I used to invest Rs.3000 for 6 months, finally I about to get Rs.18,000 without interest as per my RD, the bank gave me Rs. 18594 its really good, the online banking is very convenient.
    Was this review helpful? 5
    , bangalore
    Reviewed on Sep 14, 2019
  • HDFC Bank Recurring Deposit
    "Good Investment"
    HDFC BANK
    0.5 4.0/5 "Great!"
    I have a recurring deposit from HDFC. I have a salary account in HDFC hence i have chosen the same bank. I have been investing the money of Rs. 1000 every month and they are providing a interest rate of 7%. Once my salary is credited, my RD amount will automatically deducted from my account. There is a lockin period of 2 years.
    Was this review helpful? 3
    , bangalore
    Reviewed on Sep 14, 2019
  • Kotak Recurring Deposit
    "Good investment for the future"
    KOTAK MAHINDRA BANK
    0.5 5.0/5 "Blown Away!"
    I had a Recurring deposit for one year with Kotak Mahindra, through netbanking I invested Rs.500 on monthly basis they gave around 7.5% of interest for the total amount. Now I withdrawn the benefits even there is no charges for pre matured as well. The online site is very convenient to invest the money.
    Was this review helpful? 1
    , chennai
    Reviewed on Sep 14, 2019
  • HDFC Bank Recurring Deposit
    "Can do better on the interest"
    HDFC BANK
    0.5 5.0/5 "Blown Away!"
    Recently I opened HDFC recurring deposit, the interest rate is lesser around 7.25% fpr per annum, every month I activated ecs for Rs. 2000 it has the term of 18 months. There is no pre matured charges to take the liquidity. The online banking is convenient to check the RD transactions as well.
    Was this review helpful? 1
    , bangalore
    Reviewed on Sep 05, 2019
  • HDFC Bank Recurring Deposit
    "Really useful for the people for savings purpose."
    HDFC BANK
    0.5 5.0/5 "Blown Away!"
    HDFC People has provided me a RD account when i opened my salary account hence every month Rs. 1000 has been deducted from my account. I get a quick response from HDFC. Their interest rate is quite good. There is no additional charges and there is a lockin period of 18 months.
    Was this review helpful? 2
    , indore
    Reviewed on Sep 01, 2019
  • ICICI Bank Recurring Deposit
    "Best Investment"
    ICICI BANK
    0.5 5.0/5 "Blown Away!"
    I have been investing the money through recurring deposit. Since i have a salary account from ICICI, i have chosen the RD with them. I am investing Rs. 2000 every month and the rate of interest is 7.9% which is fine for me. Once the salary is credited to my amount, by next second automatically the amount is deducted from my account.
    Was this review helpful? 1
    , bangalore
    Reviewed on Aug 31, 2019
  • HDFC Bank Recurring Deposit
    "Good Savings scheme"
    HDFC BANK
    0.5 4.0/5 "Great!"
    I have a basic recurring deposit in HDFC. In HDFC, they themselves deducting the money of Rs. 1000 every month for a recurring deposit. The interest rates are good which is more than 7%. There is no additional charges. There is no lockin period and i can canceled it any time. The time which i have chosen for 27 months.
    Was this review helpful? 4
    , chennai
    Reviewed on Aug 26, 2019
  • HDFC Bank Recurring Deposit
    "Good saving for future"
    HDFC BANK
    0.5 5.0/5 "Blown Away!"
    When I opened salary account I got the RD along with that, I am investing the money on the monthly basis, the rate of interest for RD is good. They are doing auto deduct from the account balance, I can view the RD transaction through netbanking.
    Was this review helpful? 2
    , bangalore
    Reviewed on Aug 23, 2019
  • HDFC Bank Recurring Deposit
    "Good savings scheme"
    HDFC BANK
    0.5 5.0/5 "Blown Away!"
    I have been maintaining Recurring Deposit account with HDFC, I have opt for one year of recurring deposit. I am investing the money of Rs.2000 per month, the interest rate is good as per th RBI guideline. There is no charges for holding this. Good saving and getting benefited from this.
    Was this review helpful? 3
    , bangalore
    Reviewed on Aug 22, 2019
  • Union Bank of India Recurring Deposit
    "Safe and Secured investment"
    UNION BANK OF INDIA
    0.5 4.0/5 "Great!"
    Currently Union of Bank is offering 7% of interest per annum for the recurring deposit investment. The online option is very good to make the deposits without going to the bank. I can deposit minimum of Rs. 500 to max period, I have option increase the tenure period as well.
    Was this review helpful? 1
    , mumbai
    Reviewed on Jul 29, 2019
  • HDFC Bank Recurring Deposit
    "Good for saving"
    HDFC BANK
    0.5 4.0/5 "Great!"
    I have been maintaining RD account with HDFC, I have opt for one year of recurring deposit. I believe we can deposit Rs.5000 per month, the interest rate is good as per th RBI guideline. There is no charges for the liquidity before the maturity period it won't cover tax.
    Was this review helpful? 3
    , kolkata
    Reviewed on Jul 29, 2019
  • IDBI Recurring Deposit
    "With LIC, you can trust them even more"
    IDBI BANK
    0.5 3.0/5 "Satisfactory"
    The interest rate was good for Recurring Deposit. I believe, IDBI is providing around 8 to 9%. I have done it for one year before 2 years back. The bank is next to my place and their staffs were friendly. They are easily accessible and any queries will be solved in time.
    Was this review helpful? 4
    , bangalore
    Reviewed on Jul 26, 2019
  • SBI Recurring Deposit
    "Good investment plan"
    STATE BANK OF INDIA
    0.5 3.0/5 "Satisfactory"
    I am investing the amount of Rs. 1400 every month and the given interest rate is very low which is between 2 to 3%. For the saving purpose i have chosen this account. Through auto debit, I'm paying the amount. There is a lockin period for 1 year and there is a no service charges for my Recurring deposit.
    Was this review helpful? 8
    , bangalore
    Reviewed on Jul 25, 2019
  • ICICI Bank Recurring Deposit
    "Good"
    ICICI BANK
    0.5 4.0/5 "Great!"
    ICICI BANK is convenient to do my transactions with one bank and also the customer service is good so have opened my Recurring deposit account. Its been 4 to 5 years and the benefits are as per the market price. I could manage my account online.
    Was this review helpful? 0
    , pune
    Reviewed on Jul 24, 2019
  • Axis Bank Recurring Deposit
    "GOOD"
    AXIS BANK
    0.5 5.0/5 "Blown Away!"
    I am using the AXIS BANK services since from last 7-8 months, the reason for getting the R.D was it was a salary account. The rate of interest was 7.25%, to open the account it is good. There is a application is good and it is good to use with the bank.
    Was this review helpful? 4
    , bangalore
    Reviewed on Jul 20, 2019
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