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ULIPs vs FDs – Which Give Better Returns?

By Finserv MARKETS - Aug 14,2019
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A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date. . But ever since the 50-basis point repo rate cut implied by RBI, there has been a significant impact on the fixed deposit rates across all banks in India. Hence, the rate of return depending on this new implication is most likely to take a toll on the tax-saving fixed deposits.

Do We Have An Alternative To Bank FDs?

Now that FDs are likely to provide low returns, many people are considering Unit Linked Insurance Plans as a worthy alternative. In fact, it allows you to invest in funds of your choice and enjoy insurance coverage, all under a single policy.

Basically, a portion of your premium amount is diverted towards life cover while the remaining amount is used to invest in equity or debt funds for gaining high ULIP returns. Pretty much like mutual fund investments, here, you will be allotted units which hold a net asset value (NAV). The NAV helps determine the rate of return.

How Are ULIP Plans Better?

To know how unit linked insurance plans are better compared to bank FDs, here are some of the prominent benefits of this policy are explained as follows –

  • High Tax Savings

ULIPs are very tax-friendly, mainly because the premiums that you make towards the policy are tax-deductible under Section 80C of the Income Tax Act. Moreover, the amount that you receive after the policy matures is also tax-free under Section 10(10)D.

However, when it comes to tax-saving FDs, only your investment amount is tax-deductible under Section 80C. The interest that you earn on your FDs is still taxable.

  • High Returns

Generally, bond rates go up when the interest rates are decreasing. Also, as there will be more rate cuts expected from the RBI because of reducing inflation, you will observe more capital appreciation from the bonds.

Hence, it is wise to invest in debt-oriented plans after the repo rate cute implied by RBI. In case you are ready to handle a higher risk, opt for equity or even balanced ULIP plans (balanced plans majorly have moderate degree of risk).

  • Coverage for Life

One of the unique facility is that along with investment benefits, it provides life cover. It is something you will not find in any other investment plan.

It is, however, noteworthy that as per the IRDA (Insurance Regulatory and Development) guidelines, ULIP plans provide life cover for at least times of the annualized premium.

A Final Thought

The ULIP plans are quite beneficial for someone looking to earn high return on their savings, enjoy life cover, and tax benefits all under one roof.

To enjoy all these benefits, consider the Bajaj Allianz ULIP plans at Finserv MARKETS. It offers you great flexibility and high returns. Allow your money to grow with dual benefits – market investment as well as insurance coverage.

To know more on ULIP investments in depth, you can check out these blogs:

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522