comparison between PPF vs LIC which is better
PPF expanded as Public Provident Fund is an investment scheme backed by the government. In a PPF account, an investor can deposit a minimum of Rs 500 and a maximum of Rs 1.5 lakhs per financial year. If this criteria is met, Section 80 C assures tax exemption for the principal, returns and the maturity amount.
Life insurance overview
Life insurance schemes require that you pay the premium at regular intervals in order to be eligible for the protection. How much risk cover the given policy provides depends on the sum assured by the policy. Depending on the type of life insurance purchased, the assured sum is paid out in the event of the death of the policy holder or upon the maturity of the plan.
Comparing between PPF and Life Insurance plans
Your investments in both PPF and life insurance are safe and legal. While PPF is a central government backed scheme, life insurance products are offered wither by the government-owned Life Insurance Corporation (LIC) or by some private insurance companies that are regulated by the government body IRDAI.
PPF investments assure 8.7 % yield as per the present interest rates. The returns are compounded yearly. The returns in a Life Insurance plan differs between policies and between the provider companies. The death benefit of a life insurance plan is several times the invested amount depending on the time of death of the policy-holder. The yield on the maturity benefits can be between 4% and 6%.
The investor can choose to invest anywhere between Rs 500 and Rs 1.5 lakhs per year in a PPF scheme and hence the amount that can be invested in flexible. In case of Life insurance plan, the premium payable is fixed and is never flexible. The premium payable varies between different life insurance plans depending on the sum assured in the event of death of the policy-holder.
In general terms, the minimum lock-in period after which you can encash or surrender the life insurance policy is 3 years. After this lock in period, you can take a loan on the policy. In case of PPF, you can withdraw from every 7th financial year from the date of opening the account. There are restrictions on how much you can withdraw and the plan cannot be closed until the 15th year.
Status as a financial instrument
AdvertisementA life insurance policy is a kind of property carrying a legal status. You can mortgage, transfer, gift, sell, or hypothecate it provided you meet the applicable laws. You can also take a loan on the policy from the insuring company. Whereas, a PPF cannot be hypothecated or used for collateral purposes.
Since the best stand regarding investments is protection first and savings next. In this way, only when you have protected your family with the right kind of Life Insurance plan, you can think of saving in a PPF scheme.
Popular on BI
- How OnlyFans star Riley Reid plans to 'immortalize' herself using AI
- A leading supplement researcher says she doesn't take any — because she's getting what she needs from her vegan diet
- Mattel rolled out a Barbie to honor a late Cherokee Nation chief with a language error on the box that says 'chicken' instead of 'Cherokee'
- Budget offering: Redmi 13C and Redmi 13C 5G hit Indian market sub ₹10,000
- Market mavens expect a mega bull run in 2024 as risks fade, large caps & cyclicals to drive rally
- Value-for money Indian private schools in Dubai now have over 90,000 students
- Best split AC for medium size room in India 2023
- Nine in ten Indian firms view GenAI tools as potential security risk