PPF VS LIC

Overview

PPF and LIC are two different investments and suit different needs. Comparing the two investments would result in drastic differences. While LIC policies serve the purpose of insurance, a PPF serves the purpose of savings.

• PPF is a Public Provident Fund meant for long-term savings and retirement. Anyone is entitled to open a public provident fund.
• LIC stands for LIC Insurance Corporation and means the life insurance policy that you can take against risks.

Life Insurance Corporation Policy

Life Insurance is a contract that you draw out with a company to pay premiums regularly. In turn, the company will pay you a lump sum on the events that you are insured against. You will receive the amount on any of the particular dates.

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

LIC policies suit people who have dependents. When you pass on, if the policy is still running, your nominee will receive the insurance money. In this way, you safeguard your loved ones when you are not there to provide for them any more. If the policy matures before your death, then it can be treated as savings or a retirement fund.

• LIC is a long-term commitment.
• Premiums paid towards LIC are eligible for tax deductions.
• Flexible plans allow policyholders to save money to meet the costs of important life events such as children, their education and marriage, or even periodical monetary needs.
• Policies can be availed of by any person who is of legal age.
• LIC policies are suitable for the head of the house who provides for other family members.
• Policies can be taken for your spouse and children as well.
• LIC policies can also be profitable under the “with profit” scheme wherein the premiums are higher, but participating policies can share in the profits of the fund, if any.
• With an LIC policy, it is easy to get loans approved. Life insurance policies are usually accepted as security.

Public Provident Fund

Public Provident Fund is a long term investment scheme that was framed under the Public Provident Funds Act, 1968. This scheme is backed by the Government of India making it a very safe and secure investment. The rates of interest are high and the returns are exempted from tax.

• You can open a PPF with Rs. 100. The minimum investment required is Rs 500 to be invested in a year. A maximum of Rs. 1.5 lakhs can be invested in a year.
• You can open the account with cash or a cheque.
• The current interest rate is 8.7% per annum.
• Nomination facility is available.
• You can also transfer your account between post offices.
• A PPF can also be opened in the name of a minor but the total investment in the subscriber plus minor’s account shouldn’t exceed the yearly limit.
• PPF is a long-term investment with a maturity period of 15 years. It can be extended for another 5 years within one year of maturity.
• Withdrawals are not allowed upto the 7th financial year.
• Loans are granted from the 3rd year onward.
• Premature closure of the PPF account is not allowed.
• The investment is eligible for tax deductions. The interest earned is also tax free.