The saving needs of each and every individual are unique. Most individuals do not make wise decisions in terms of investments as they will often invest in certain products without fully evaluating the product features and their own financial needs.
Deepak Yohannan ( more)
The saving needs of each and every individual are unique. Most individuals do not make wise decisions in terms of investments as they will often invest in certain products without fully evaluating the product features and their own financial needs. With the numerous investment options available, choosing the most suitable product becomes all the more confusing. Thus, one needs to do a proper evaluation and then choose a product according to his requirements and not base their decisions on random suggestions.
Insurance is one of the most important investment avenues for security reasons. However, today, most individuals consider insurance to be just another investment option overlooking its protection feature. As such, comparison of insurance products against other saving products often arises.
I have often come across a question of whether a Life Insurance Product is better vis-à-vis a PPF. This question has intrigued me as the 2 products are widely different but at the same time I feel the need to answer it since the question has risen.
Public Provident Fund (or PPF in short) is a Long Term Debt Scheme which had been introduced by the Government of India. Under PPF, an individual makes periodical payments into his PPF account and get a lump sum amount after maturity. The interest rate of a PPF is 8.8% p.a. compounded yearly from April 1, 2012. There is no compulsion on the amount of contribution required every year in a PPF Account. One can deposit any amount from Rs 500 to Rs 1 lakh per annum for which he would get a tax rebate under section 80C and can vary the amount each year.
Under life insurance (LI in short), an individual makes small regular payments to avail the risk cover (called SA) which is paid in case of death or maturity. Life Insurance also provides a Tax Rebate for the premium payment towards the same but the contribution amount is fixed for the policy tenure opted.
Though both LI and PPF involve regular payments towards savings and have certain similar features, they are very different from each other. So, it would be prudent to study their respective drawbacks and benefits over each other. First let’s highlight the similar features.
These are the basic and the most common similarities of PPF and LI. Now there are some differences as well between the two.
PPF OVER LI:
LI OVER PPF:
Thus, both are important financial instruments and can be opted for under different requirements but only after carefully weighing the pros and cons of the same and analyzing your own financial needs and responsibilities without investing blindly as per the trend of the market or advices based on other’s needs and wants.
The author is CEO of MyInsuranceClub.com and can be reach at firstname.lastname@example.org
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Anil Rego, Founder & CEO, Right Horizons
Founder & CEO, Right Horizons