Fixed Deposit and Life Insurance are common investment avenues, to help you save money. Banks, NBFCs and other companies offer FD
, while insurance corporations are the only providers of insurance. The main difference between the two lies in the fact that the former is an investment and the latter is risk cover.
Read on to know which is a better suited investment option, as per your needs.
DID You Know ? Bajaj Finance is now offering interest rates of upto 7.00% on fixed deposit and 0.25% more for senior citizens. What's more, online investors get 0.10% extra (not applicable for senior citizens) - Invest Online
Here's a quick comparison between a Fixed Deposit and a Life Insurance Policy.
As an Investment:
- Fixed deposits are suitable for short-term investments ranging from 12–60 months.
- On the other hand, insurance has a term of 10 years extending up to a lifetime.
Loan against Investment:
Here’s a table to help you compare the differences between Life Insurance and Bajaj Finance Fixed Deposit easily:
||Bajaj Finance Fixed Deposit
||Minimum tenor of 10 years
||Flexible tenors from 1 to 5 years
||Depend on insurance premiums as per policy terms
||Start with Rs. 25,000
|Assurance of returns
||Bonus is declared at year-end and in Unit-Linked Insurance Policies, returns are market-linked
||Assurance of guaranteed returns
|Maturity of deposit
||On maturity of policy (20-25 years)
||On maturity of deposit, as per your choice
||After lock-in period of 3-5 years
||After lock-in period of 3 months
For those looking for a flexible investment option, Fixed Deposit is a better alternative as it enables you to grow your savings easily, as per your needs.
To know more about investing in Fixed Deposit and Insurance Policies, read on.
Types of FDs and Life Insurance Policies
Fixed deposits are of two types – cumulative fixed deposit
and non-cumulative fixed deposit
In cumulative fixed deposit, the bank or finance company pays the interest annually. In non-cumulative fixed deposits, the interest is paid at shorter intervals. You can choose either depending on your financial need and your investment goals.
Insurance is also of two types – whole life insurance and term life insurance. Essentially, it is a long-term investment. The most important aspect of life insurance is risk coverage. It provides the policy sum to the dependents of the policy holder in the event of his/her death. It also provides good return on investment, at maturity of the policy. One risk of the policy is that if you do not pay the premium for the entire lock-in period, you will not get any returns