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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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Customer Reviews

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  • Axis Bank Recurring Deposit
    "Good and easy deposit scheme"
    AXIS BANK
    0.5 4.0/5 "Great!"
    I have chosen the RD from Axis bank. In their app, there is a option to active the RD since its easy to opened the RD account in 5 minutes, i have selected this and other than this Axis is my salary account. Interest rate is okay but not that competitive. I'm investing the amount of Rs. 2500 every month. They have a option of lock in period between 1 year to 25 years and i have selected 10 years.
    Was this review helpful? 8
    , bangalore
    Reviewed on Jan 09, 2020
  • HDFC Bank
    HDFC Bank Recurring Deposit
    "Good Interest rate and benefit"
    HDFC BANK
    0.5 5.0/5 "Blown Away!"
    Chosen my recurring deposit from HDFC because i found the interest rate is good. I have been investing the money of Rs. 1000 per month. There is a lockin period of 4 years. They are giving a interest rate of 7.25%. The amount is automatically debited from my account. I have opened this account through their net banking.
    Was this review helpful? 12
    , haridwar
    Reviewed on Jan 07, 2020
  • Axis Bank Recurring Deposit
    "Good product"
    AXIS BANK
    0.5 4.0/5 "Great!"
    When i opened the mobile app every time with Axis bank, they have shown me an offer with the rate of interest of 7% for the recurring deposit hence have chosen due to the higher interest rate. I am investing the money of Rs. 1000 every month. There is no lockin period of this Recurring deposit. I have activated the auto deduction option for this savings purpose.
    Was this review helpful? 4
    , kolkata
    Reviewed on Dec 31, 2019
  • ICICI Bank Recurring Deposit
    "Best option"
    ICICI BANK
    0.5 4.0/5 "Great!"
    I made the recurring deposit with ICICI bank. I have invested the money of Rs. 1000 every month. I have chosen the lock in period of 10 months. The amount is automatically deducted from my account. They have provided me a interest rate of 7.5%. I'm holding the account from ICICI hence i found this option in their app so that i have chosen.
    Was this review helpful? 15
    , bangalore
    Reviewed on Dec 16, 2019
  • ICICI Bank Recurring Deposit
    "Better Scheme"
    ICICI BANK
    0.5 5.0/5 "Blown Away!"
    Chosen my recurring deposit scheme from ICICI bank for the savings. The security system is good in ICICI hence i have chosen them. I'm investing the money of Rs. 3000 in every quarter and the amount is automatically deducted from my account. I'm not sure about the interest rate provided by them.
    Was this review helpful? 10
    , bangalore
    Reviewed on Dec 10, 2019
  • HDFC Bank Recurring Deposit
    "Good saving bank"
    HDFC BANK
    0.5 5.0/5 "Blown Away!"
    I have taken a RECURRING DEPOSIT from HDFC Bank, and i am paying monthly Rs. 2000. I started this RD presently only. This is a long term plan and i am getting some good returns after 10 years. Customer service was good. This is very useful for future.
    Was this review helpful? 9
    , visakhapatnam
    Reviewed on Dec 06, 2019
  • HDFC Bank Recurring Deposit
    "Good Flexibility"
    HDFC BANK
    0.5 4.0/5 "Great!"
    The best thing about HDFC Recurring Deposit is the online option which is simply good. When i want to increase the amount, i can do it on a monthly basis. The interest rate is less which is 1%. I have selected the lockin period of 3 years and overall satisfied.
    Was this review helpful? 10
    , mumbai
    Reviewed on Nov 12, 2019
  • HDFC Bank Recurring Deposit
    "Good One"
    HDFC BANK
    0.5 4.0/5 "Great!"
    I have chosen the Recurring Deposit from HDFC because its more convenient. Its around Rs. 2000, i have invested every month and its automatically deducted from my account. There is no locking period. They are providing the interest rate of 6.8% to their customer.
    Was this review helpful? 4
    , hyderabad
    Reviewed on Nov 12, 2019
  • 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? 6
    , nasik
    Reviewed on Oct 15, 2019
  • 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? 7
    , 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? 9
    , 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? 4
    , 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? 6
    , 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? 11
    , 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? 11
    , 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? 7
    , 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? 6
    , 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? 9
    , 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? 5
    , 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? 8
    , chennai
    Reviewed on Aug 26, 2019
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