Life Insurance vs. PPF: Which is better in 2022?
The Public Provident Fund, abbreviated PPF, is a government-backed investing plan. In a single fiscal year, an investor can invest a least of Rs 500 and a total of Rs 1.5 lakhs into a PPF account. If this criterion is satisfied, Section 80 C assures that the returns, principal, and maturation sum are tax-free.
Premium payments should be made on a regular basis in order to gain the coverage or risk cover offered by life insurance. A policy’s sum assured is the sum of risk protection provided by the policy.
This sum assured is paid in the event of death or maturity, based on the category of life insurance purchased, like a pure term plan. The expense of a life insurance plan is deductible under Internal Revenue Code Section 80C.
The Public Provident Fund (PPF) is a long-term debt plan launched by the Government of India. An individual contributes to the PPF account on a regular basis and receives a lump amount at maturity.
The current PPF interest rate is 8% per year. Any sum between Rs 500 and Rs 1.5 lakhs per year can be deposited into a PPF account, and this investment is tax-deductible under Section 80C of the Income Tax Act.
In this blog, you will get a comparative analysis of the benefits of life insurance and PPF. This would definitely help you with good ‘food for thought’ if you plan to buy life insurance.
Should I Choose Life Insurance Over PPF?
Everyone knows what is life insurance and what is PFF. And, which one to choose is one of the very typical inquiries that people have when they are researching different investing alternatives for retirement planning. The following are some crucial points that can help you find a solution to this question:
Legality & Safety
PPF and life insurance are both lawful investment options that are regarded as quite safe. PPF is a national government policy, and life insurance in India is provided by the government-owned Life Insurance Corporation (LIC) as well as private sector insurance firms regulated by the government-established IRDAI.
Return on Investment (ROI)
The current yearly cumulative return on PPF is 8.7 percent, although the government may adjust this. The payout on maturation benefit in life insurance varies from insurer to insurer and policy to policy.
The return on maturation benefit is normally between 4% and 6%, but the “return” on death benefit cannot be forecast as it might be many times the premium paid based on the time of death from the policy’s commencement date.
It should be emphasized that while an individual can purchase as many plans as they wish, they can only have a single PPF account. In contrast, the premium for insurance coverage is fixed and not variable. The sum assured, and hence the premium required at the buying time can be tailored to the customer’s specific demands and financial status.
Both PPF and life insurance programs may be easily reactivated if you stop investing or making premium payments for whatever reason. PPFs have a period of 15 years, which can be expanded in 5-year increments up to a maximum of 25 years. In life insurance, you can select the policy period, subject to particular limits and restrictions that vary with each policy.
Withdrawals are permitted in PPFs each year from the seventh fiscal year to the year of account opening. The quantity of withdrawal is limited, and the account cannot be closed or the entire sum withdrawn before the 15-year period is completed.
Loans are available after the third fiscal year following the opening of the PPF account. Generally, the minimum lock-in time after which a life insurance plan can be encashed is three years. After the policy’s lock-in time, you can take out a loan or cash value.
A life insurance plan is a legally recognized “property.” The ownership of this asset can be sold, rented, rebated, donated, or transferred in line with the prevailing legislation. PPF cannot be used as collateral since it cannot be seized by creditors or judicial order.
Investments in both PPF and life insurance qualify for a Section 80C tax credit of up to Rs 1.50 lakh under the Income Tax Act. In a PPF, the income is tax-free. Life insurance maturity payments will be considered as taxable revenue only if the annual premium paid exceeds 10% of the total covered. Aside from that, it is also tax-free. The death benefit is completely tax-free.
Convenience From Care
PPF accounts can be created at post offices or certain banks. Investing in the PPF account must be done on a regular basis. There are no reminders/notices issued. Insurance providers, on the other hand, give you reminders through agents and post/SMS. In both cases, you can name somebody to accept the money if you die.
Compulsion To Maintain The Investment
There is no obligation in any case. If you cease contributing to your PPF at any moment, you can certainly draw at the conclusion of the 15-year period. If you want to restart payments to your PPF account after a few years, you can do so under specific criteria.
Seized by creditors
Creditors cannot seize the PPF sum. Life insurance plans, in general, can be connected. But, with the Married Women’s Property (MWP) Act, it is permissible to get insurance that cannot be seized by creditors.
PPF and life insurance are essentially distinct products. Life insurance should always be prioritized since it safeguards your dependents in the unfortunate case of your death. Once your financial safety has been assured, you may focus on other elements of your life, such as your kid’s education and wedding, as well as your pension.
In addition, it is vital to examine the ABSLI (Aditya Birla Sun Life Insurance) website in order to find the best life insurance in 2022.