Friday, 3 April 2015

Comparison between Public Provident Fund and Life Insurance Policy

Public Provident Fund (PPF)

PPF stands for Public Provident Fund, it is basically a saving cum tax saving scheme introduced by National Savings Institute of the Ministry of Finance in 1968 for the uncategorised sector. Any Indian who is residing in India is eligible to open his account under PPF Scheme. Even a minor can open the account with the help of his guardian. The interest rate is 8.7% Per annum (Compound Annually).

Life Insurance (LI)

Life insurance is a contract between insured and insurer. Where insured person is supposed to pay some amount to Insurer which is called premium, paid on regular interval or lump sum to avail the protection or risk cover(sum assured) .The sum which is assured is paid at the time of maturity or death by the Insurer.

Comparison between Public Provident Fund (PPF) Vs Life Insurance (LI)

1. Purpose:

Public Provident Fund (PPF) is to secure yourself in term of finance after retirement. Whereas Life Insurance is to protect yourself against unfavorable condition like illness, death etc.

2. Period:

Public Provident Fund (PPF) is for 15 years, where as you can extend it in multiples of 5 year blocks for n number of times. For life Insurance minimum duration is for 5 years and maximum is up to death.

3. Premium:

The premium in Public Provident Fund (PPF) starts from Rs 500 to Rs 1.50lakhs. Where as in Life Insurance there is no minimum and maximum limit.

4. Tax Rebate:

Public Provident Fund (PPF) you can have tax rebate under 80C up to 1.5 Lakhs. In Life Insurance you can get Tax rebate under 80C up to 1.5 Lakhs.

5. Return Guarantee:

In Public Provident Fund (PPF) there is a guaranteed return and the interest rate for this financial year is 8.7%. Whereas in Life insurance there is no guaranteed return and it depends upon the market condition. ULIP or endowment plans may give return of 4% to 6%.

6. Loan:

In Public Provident Fund (PPF) you can have a loan of 60% of the amount deposited in your account from third to sixth year. But in Life Insurance there is no loan facility.

7. Locking Period:

In Public Provident Fund (PPF) the locking period is for 5 years. In life Insurance the locking period is 3 years.

8. Surrender:

In Public Provident Fund (PPF) there is no facility of Surrender unless it is a case of death. Where as in Life Insurance you can have the facility of surrender.

9. Agent:

In Public Provident Fund (PPF) initially there were account opening agents. But now there is no agent you can open the account in post office or listed banks. For Life Insurance there are agents from whom you can take policy.

10. Penalty:

In Public Provident Fund (PPF) if amount is not deposited within a year there isa penalty of Rs 50. Whereas in Life Insurance the late fees is 10% of the premium.

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