Which Is Better: Fixed Deposits or Money-Back Policies

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 make loans to investors backed by FD certificates. A fixed deposit may require the opening of a new account. You can do so without having to register a new account. A Money-Back plan is a type of life insurance policy that includes a Money-Back option. When a specified length of time has elapsed since the plan's inception, the life assured gets monthly payouts. They also get survival, maturity, and death benefits, as well as tax deductions under Section 80C of the Internal Revenue Code of 1961. It safeguards the assured's life by providing insurance coverage. The risk connected with the coverage is little to none. It provides supplemental benefits to address aspects of a person's life that are not monetarily covered by the policy.

What Is the Distinction Between Money Back Plans and Fixed Deposits?

Fixed deposits and Money Back plans are both important in their own right. If you're having trouble deciding which of the two is preferable for you, consider the following distinctions:

1. Policy Expiration Date

Fixed deposits with terms ranging from one to five years are suitable for both long-term and short-term investments. Fixed deposits, with durations ranging from 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 premiums vary based on the plan and are determined by characteristics such as age, period of coverage, and other considerations. 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 accompanied by a clearly specified return on investment. Fixed deposits, on the other hand, give a guaranteed return on investment. A fixed deposit might receive income on a weekly, quarterly, or yearly basis.

4. Withdrawal

Premature withdrawals are permissible in Money Back plans after two years of policy duration, although partial withdrawals are authorized in fixed deposits.

5. Payment Options

Over a lengthy period of time, the money is received in the form of annual/monthly payments under money-back insurance. The policyholder may also elect to receive the full corpus 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

A policyholder under a Money-Back policy enjoys tax advantages for the premium paid and the maturity funds received from a life insurance policy under Sections 80C of the Income Tax Act of 1961. Fixed deposits, on the other hand, do not give any tax advantages. There are a few tax-advantaged fixed deposits that can be kept for up to five years and give tax benefits under Section 80C.

Conclusion

A Money Back plan and a fixed deposit are two 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 programs, on the other hand, provide additional perks such as a guaranteed amount and other advantages.

Also Read: What Is The Difference Between Money Back Plans And ULIPs?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.