Fixed Deposits Or Money-Back Policies: Which Is Better?
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Fixed Deposits are a type of financial instrument that provides a higher rate of interest to the investor until the maturity date. Some banks may also lend to investors with the use of FD certificates as collateral. A fixed deposit may require the opening of a new account. You do not need to create a new account to do so. A Money-Back plan is a type of life insurance policy that includes a Money-Back option. The life assured gets monthly payments when a specific length of time has passed from the plan's inception. Incentives for survival, maturity, and death are also provided, as are tax reductions under Section 80C of the Internal Revenue Code of 1961. It protects the guaranteed's life by giving insurance coverage. The risk connected with the coverage is minimal to non-existent. It gives additional advantages to addressing aspects of a person's life that insurance does not cover financially.
What Is the Difference Between a Money Back Plan and a Fixed Deposit?
Fixed deposits and Money Back policies are both beneficial in their own right. If you can't decide between the two, consider the following distinctions:
1. Policy's Expiration Date
Fixed deposits with maturities ranging from one to five years are suitable for both long-term and short-term investments. Fixed deposits with durations of one to five years are excellent for both long-term and short-term investments. While Money Back plans provide both life insurance and premium back options for a ten-year minimum policy term, fixed deposits are suitable for both long-term and short-term investments, with maturities ranging from one to five years.
2. Make A Financial Investment
Money Back insurance prices vary by plan and are influenced by criteria such as age, length of coverage, and others. A fixed deposit, on the other hand, has no maximum investment limit and can be opened with as little as Rs. 1,000.
3. Investment Return
Money-back guarantees on investments are combined with a clearly specified return on investment. Fixed deposits, on the other hand, offer a guaranteed rate of return. A fixed deposit might yield interest weekly, quarterly, or annually.
4. Withdrawal
Premature withdrawals are permissible in Money Back plans after two years of policy term, although partial withdrawals are authorized in fixed deposits.
5. Payment Options
Money-back insurance pays out in annual/monthly instalments over an extended period of time. The policyholder has the option of receiving the whole amount as a lump sum payout. Fixed deposits, on the other hand, allow you to withdraw the whole payment amount at the conclusion of the policy period in one single sum.
6. Tax Benefits
Under Sections 80C of the Income Tax Act of 1961, a Money-Back policyholder obtains tax advantages for the premium paid and the maturity funds received from a life insurance policy. Fixed deposits, on the other hand, do not give any tax advantages. There are a few tax-advantaged fixed deposits available that may be kept for up to five years and give Section 80C tax benefits.
Conclusion
Both a Money-Back plan and a fixed deposit are secure investment alternatives for saving and growing your money. Each has its own set of advantages. You must invest in a product that is appropriate for your financial situation and needs. Money-back plans, on the other hand, include additional perks such as a guaranteed amount and other advantages.
Also read- Are Money-Back Policies a Good Idea for You
