Benefits of LIC vs Post Office Recurring Scheme – Which Investment Option Is Right For You?

This article provides an in-depth comparison of the LIC vs Post Office Recurring Scheme, so you can decide which investment option is right for you. We look at the advantages of each scheme, their returns, and more!

There are a lot of investment options available in the market, each with its own set of pros and cons. Two of the most popular investment options are LIC and Post Office recurring schemes. Let’s take a closer look at both to see which might be a better fit for you.

LIC offers a wide range of investment options and is one of the most trusted names in the insurance industry. However, its policies can be complex and it is important to carefully read the fine print before signing up.

Post office recurring schemes are a much simpler investment option with fewer options to choose from. They are also backed by the government, making them a safe and secure investment. However, the returns on these schemes are often lower than other options in the market.

Benefits of LIC Scheme:

1. You can deposit Yearly, Quarterly, or Monthly(ECS) in the LIC Scheme.
2. Maturity received in the LIC scheme is TAX-FREE under section 10-10d of the Income-tax Act.
3. The amount deposited in LIC is exempted under section 80c of the Income-tax Act.
4. You can continue the LIC scheme after 10 years. You cannot continue the post office scheme after 1 year.
5. If you forgot to take maturity at the end of the 10 years. You can get a return beyond 10 years in the LIC scheme. This is not available in the post office scheme.
6. Get free insurance with the LIC scheme.
7. LIC is awarded by trust brand No.1
8. 1000’s of Insurance agents to help you and collect your premiums from your office/Home. In Post, office scheme home service is not available.

Maturity at the end of the 10 years in the Monthly Scheme

LIC Maturity Calculated @10% I.R.R

Post Office Recurring Deposit (RD) Scheme

Advantages:

• Simplicity: The scheme is straightforward with a fixed interest rate, making it easy for anyone to understand and invest.
• Government Backing: It’s completely secure, and backed by the Indian government, reducing investment risk.
• Regular Savings Habit: Encourages a disciplined saving pattern with regular monthly deposits.

Disadvantages:

• Lower Returns: The interest rates are generally lower than what LIC or other market-linked investments might offer.
• Taxation on Returns: Unlike LIC, the maturity amount from RD schemes is taxable.
• Fixed Term: Typically, RD schemes mature within a year, limiting the duration of investment.

Conclusion

Choose LIC if:

• You’re looking for tax benefits, higher returns, and the safety of life insurance.
• You want flexibility in premium payments and the option to continue the policy beyond its initial term.
• You value the guidance and service provided by insurance agents.

Choose Post Office RD if:

• Simplicity and security are your top priorities.
• You are comfortable with lower returns in exchange for guaranteed returns and government backing.
• You aim to develop a regular saving habit without needing the complexity of insurance policies.

Both have their merits, tailored to different investor profiles. For those with a moderate risk appetite and looking for tax efficiency, LIC might be more appealing. For conservative investors prioritizing safety and simplicity, the Post Office RD could be the better choice. Always consider your personal financial goals, risk tolerance, and the need for insurance coverage when deciding between these schemes.