Both LIC and FD are popular investment options in India, each having its own pros and cons. Choosing between the two largely depends on your investment goals, risk appetite, and time horizon. Let's take a closer look at both options:
LIC or Life Insurance Corporation of India is the largest insurance company in the country. LIC offers various insurance plans that not only provide life coverage but also act as investment products. When you buy an LIC policy, you pay a premium towards the policy, which in turn is invested by the company in stock markets or bonds. The company then pays returns to you in the form of loyalty additions, bonuses, and guaranteed returns.
- Life coverage and investment opportunity
- Tax benefits under Section 80C of the Income-tax Act.
- Guaranteed returns on many policies
- There are also policies that offer profits based on market performance
- Long lock-in period
- Complicated terms and conditions that many people might find difficult to understand.
- Higher charges, including service charges, administrative charges etc.
FD stands for Fixed Deposit, which is an investment product offered by banks and other financial institutions. As the name implies, when you invest in an FD, you deposit a fixed sum of money for a fixed period of time and earn interest on it. The interest rate and the period of investment are fixed when you make the deposit. Thereafter, you cannot withdraw your money until the maturity of the FD.
- Guaranteed returns on investment
- Low risk compared to other investment options
- Flexible investment tenures as per requirement based on bank policies.
- No insurance cover
- No scope for market-linked returns
- Fixed returns with less potential of market profits
- Taxable income subjected to taxation based on your tax slabs.
Ultimately, the choice between LIC and FD depends on your investment objectives and risk appetite. If you are looking for life coverage along with investment, then LIC is a better option. However, if you want to earn risk-free returns with guaranteed security, then FD is the right choice for you. Be sure to conduct a thorough analysis of both options and choose the one that works best for your investment goals.