Life Insurance vs FD: which is better for investment

If you wish to explore investment options, you will find an array of financial products in the market. Fixed deposit and Life insurance plans are among the investment vehicles that provide high returns on your investment. They are also highly popular investments products that most people are aware of. Though life insurance is an insurance product, quite a many people use it as an investment option. On the other hand, fixed deposit is an insurance product that can let you invest for varying tenures. When you want to decide which among them is a better investment option, read on to throw more light on the topic.

Why invest in fixed deposits?


Banks and other financial firms offer fixed deposit schemes and you can reap a wide range of benefits by investing in them. FD schemes give you higher returns compared to what you get on your savings account. The returns are assured and you can make premature withdrawal in case of arising needs and emergencies. The interest accumulated can be claimed either monthly or annually or on maturity of the investment. You can choose the investment tenure from 7 days to 10 years.

Why invest in life insurance schemes?

Similar to FDs, life insurance plans also come with a set of attractive benefits. On your fixed deposits, you can get tax benefits under Section 80C and 80D of the Income Tax Act of India 1961. In the event of the policy holder’s death, the life insurance plan provides a risk coverage to the dependents in the family. The coverage provided by the life insurance plan stretches far beyond the period for which the premium is paid. The different types of life insurance plans available are term insurance plans, whole life plan, retirement plan, senior citizen plan and others.


Comparing between FD and Life Insurance Plan

Fixed deposit is considered as a better investment option as it is exclusively designed for your investment as well as saving needs. If you wish to save and also invest for future, it is always advised to invest in FDs. On the other hand, life insurance plans are meant to offer risk protection as well as protect the financial interests of your family in your absence.

Thinking of short and long term investments, FDs are better. Life insurance plan are suitable only as long term investment options. The minimum period of investment in a life insurance plan is about 10 years. The minimum amount that you can deposit in a FD plan is Rs. 1,000. The minimum period differs between plans in a life insurance plan.

You will know the returns in case of a fixed deposit scheme in the beginning of the investment whereas in some unit linked life insurance plans, the returns are subject to market conditions.

Fixed deposits are made for saving needs and life insurance plans are bought in order to relieve your near and dear ones from the financial risks in case of your unexpected absence.

Final word Life Insurance Vs FD

If fixed returns is your expectation, FD is a good investment option though you might not get any tax benefits. Even if you look forward to regular earnings from your invested amount, FD is a better option. It is also the best choice for senior citizens. Life insurance plan is a good one only when viewed as a risk coverage measure.