What Are The Features And Benefits Of FD?

Fixed deposit is an investment tool offered by a majority of financial institutions including banks, NBFCs, and others. You can enjoy a wide range of benefits by investing in fixed deposits. Some of the advantages of FD are:

  • You can invest for a fixed tenor when you opt for a fixed deposit.

  • You can get a higher interest rate with FDs as compared to the interest you earn on your savings account.

  • Your returns on fixed deposits are guaranteed if you don't withdraw prematurely.

  • In case of emergency, you can take a loan against your fixed deposit and get the cash you need.

  • There are various pay-out options – monthly, quarterly, half-yearly, yearly, and at maturity. This allows you to access your returns and meet varying needs as per your convenience. 

  • You also get a flexible tenor with fixed deposits. The tenor usually ranges from 1 week to 10 years.

  • If you have several goals to achieve, you can have more than one fixed deposit and ladder them to cater to your obligations.

What Are The Features And Benefits Of Life Insurance?

Like fixed deposits, the benefits of having a life insurance plan are just as many. The benefits of life insurance plans are as follows:

  • You can get tax benefits on your life insurance under Section 80C and on your term insurance under Section 80D of the Income Tax Act of India 1961. Under section 80C alone, you can enjoy a deduction of up to ₹1,50,000. 

  • You can get risk coverage with your life insurance plan that will provide financial assistance for the rest of the family in case of the policyholder's death.

  • The duration of life insurance is long and often exceeds a decade.

  • The various types of life insurance plans available are term insurance plans, whole life plans, retirement plans, senior citizen plans, unit linked insurance plans (ULIP), etc.

  • Apart from ensuring a pool of savings, life insurance also works as a financial security for your beneficiaries in case of your untimely demise.

Comparison Between Fixed Deposit And Life Insurance

The main point of comparison between fixed deposit and life insurance is that the former is tailored to meet your investment needs. On the other hand, the latter is catered to cover your risk and offer financial security to your family members in your absence.

Apart from the above, it is also important to look at the investment term goal while comparing FD vs Life Insurance as instruments. Generally, fixed deposits are good for varying goals, including short-term and long-term investing objectives. Conversely, life insurance plans are best suited for your long-term goals.

It is also important to note that the returns on a fixed deposit can be calculated and estimated beforehand, but for certain life insurance plans like ULIPs, it is not possible as the returns are subject to market conditions.

Fixed Deposit Vs Life Insurance – At A Glance

Particular

Fixed Deposit

Life Insurance

Tenor

You get a tenor of 7 days to 10 years

You get a flexible tenor of 1 week to 10 years

Amount of investment

Begins with ₹1,000

On the basis of premium plans

Assurance

Assurance of guaranteed returns

Bonus declared at the end of the year

Maturity of deposit

On the deposit's maturity

On policy's maturity

Premature withdrawal

Post 3 months lock-in period

Post 3 to 5 years lock-in period

FD Vs Life Insurance – Which Is Better?

The answer to which is better, between fixed deposit vs life insurance, depends on your needs. If you want returns, taking advantage of the interest rate on FD instruments can be your best bet. On the other hand, if you want to cover risk, you can opt for a life insurance plan and have a financial safety net in place.

Disclaimer

The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort

The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products. 

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Frequently Asked Questions

Can I get risk coverage with my fixed deposit account?

No, you don't get risk coverage with a fixed deposit in your bank. But you can avail of this benefit in life insurance plans.

What is the minimum tenor of investment in a fixed deposit account?

The minimum tenor of investment in a fixed deposit is 1 week.

Can I access my FD corpus in case I need funds urgently?

Yes, you can always withdraw your fixed deposit in case of any emergency. All you have to do is notify your bank ahead of time. You can also get a loan against your FD if you do not want to make a premature withdrawal.

Can I get tax benefits by purchasing life insurance?

Yes, that is one of the benefits of life insurance plans. You can get tax benefits under sections 80C and 80D of the Indian Income Tax, 1961.

What is the difference between fixed deposit and life insurance?

While both FD and life insurance plans have their merits, both of them have their unique features. A fixed deposit is designed to help you augment your wealth. With a life insurance plan, you have the option to grow your wealth, but it is primarily designed to provide financial security for your loved ones in your absence.

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