Which is better PLI VS PPF
Postal Life Insurance (PLI) and the Public Provident Fund (PPF) are two popular financial instruments that individuals often consider for long-term financial planning. Before investing in any of these schemes you should check Postal Life Insurance Vs PPF, which is better.
Both serve different purposes and come with unique features. Here we look into the comparison between life insurance and PPF to help you make an informed decision about which option suits your financial goals better.
Understanding Postal Life Insurance Vs PPF
What is Postal Life Insurance (PLI)?
Postal Life insurance provides financial protection to your family or dependents in case of your untimely demise. It offers a lump sum amount, known as the death benefit, to the nominee/beneficiary upon the insured’s death. There are various types of Postal and rural life insurance policies, including Money back, Joint life insurance, whole life insurance, and endowment plans.
What is the Public Provident Fund(PPF)?
PPF is a long-term investment scheme offered by the Indian government. It aims to encourage savings and long-term investment while offering decent returns and tax benefits. PPF accounts have a lock-in period of 15 years, and individuals can make contributions annually to accumulate wealth over time.
Purpose and Benefits -Postal Life Insurance Vs PPF
Purpose of Postal Life Insurance (PLI)
- Postal Life insurance primarily serves the purpose of providing financial security to your loved ones in your absence.
- It ensures that they can maintain their standard of living and meet their financial needs even if you’re not around. PLI also provides the maturity amount in case of survival of the insurant.
- Hence it serves the purpose of not only risk cover but also providing a return on your deposited amount after a fixed maturity period.
- Postal life insurance also provides the tax benefit under section 80-C.
Purpose of Public Provident Fund (PPF)
- PPF is an instrument to facilitate long-term savings and wealth accumulation for retirement.
- PPF also offers a safe investment avenue with guaranteed returns, making it suitable for individuals looking for stable and risk-free investment options.
- Long-term investment: PPF is a government-backed scheme with a 15-year tenure (extendable in every 5-year block) offering a fixed interest rate of 7.1% p.a, declared by Govt. every quarter.
- Accessible investment: Allows individuals to open an account with just ₹100 and invest annually between ₹500 and ₹1.5 lakhs.
- Tax-saving tool: Investments in PPF qualify for tax deductions under Section 80C, and the interest earned and maturity amount are also tax-free.
PPF vs PLI Calculator:- Investment Returns
Returns on Postal Life Insurance
Postal Life insurance policies generally offer modest returns compared to other investment options. The returns depend on the type of policy and its features. PLI provides a flexible option to deposit the amount every month. Let’s understand with an example:-
| Insulant’s Age on next Birthday: | 25 years |
| Age on Maturity: | 40 years |
| Policy Tenure: | 15 years |
| Bonus Rate at present: | ₹ 52/- per ₹ 1000 SA |
| Premium Payment Details | |
| First Year Monthly Premium (with GST) | ₹ 5,591 |
| Renewal Monthly Premium (with GST) | ₹ 5,470 |
| Total Premium Paid in 15 yrs Including GST ( 5591×12+5470×168) | ₹ 9,86,052 |
| Maturity Details | |
| Sum Assured: | ₹ 10,00,000 |
| Bonus: | ₹ 7,80,000 |
| Maturity Value: | ₹ 17,80,000 |
Death or Maturity Benefit on Postal Life Insurance
| PLI- 1st yr Investment | Rs.5591 p,m | ||||||
| PLI – Next 14yrs Monthly Invest. | Rs.5470 p.m | ||||||
| Total Amount Deposited in 15yrs in PLI | Rs.986052 | ||||||
| Financial Year | Premium during the Year | Premium upto the Year | Bonus per Year | Death Benefit | Maturity/Survival Benefit | ||
| 1 | 67092 | 67092 | 52,000 | 1,052,000 | |||
| 2 | 65640 | 132732 | 52,000 | 1,104,000 | |||
| 3 | 65640 | 198372 | 52,000 | 1,156,000 | |||
| 4 | 65640 | 264012 | 52,000 | 1,208,000 | |||
| 5 | 65640 | 329652 | 52,000 | 1,260,000 | |||
| 6 | 65640 | 395292 | 52,000 | 1,312,000 | |||
| 7 | 65640 | 460932 | 52,000 | 1,364,000 | |||
| 8 | 65640 | 526572 | 52,000 | 1,416,000 | |||
| 9 | 65640 | 592212 | 52,000 | 1,468,000 | |||
| 10 | 65640 | 657852 | 52,000 | 1,520,000 | |||
| 11 | 65640 | 723492 | 52,000 | 1,572,000 | |||
| 12 | 65640 | 789132 | 52,000 | 1,624,000 | |||
| 13 | 65640 | 854772 | 52,000 | 1,676,000 | |||
| 14 | 65640 | 920412 | 52,000 | 1,728,000 | |||
| 15 | 65640 | 986052 | 52,000 | 1,780,000 | 1,780,000 | ||
Returns on PPF:-
PPF offers also attractive returns that are compounded annually. The interest rates are determined by the government and are often higher than traditional savings accounts. Moreover, the returns from PPF are tax-free, enhancing the overall gains. Let’s check with an example Postal Life Insurance Vs PPF – Which Is Better:-
| PPF – 1st yr Investment | Rs.5591 p,m | |||||||
| PPF- Next 14yrs Monthly Invest. | Rs.5470 p.m | |||||||
| Total Amount Deposited in 15yrs in PPF | Rs.986052 | |||||||
| Financial Year | Rate of Interest % p.a | Investment during the Year | Investment upto the Year | Investment up to the Year | Interest Upo the year | Closing Balance | ||
| 1 | 7.1 | 67092 | 67092 | 2,580 | 2,580 | 69,672 | ||
| 2 | 7.1 | 65640 | 132732 | 7,471 | 10,051 | 142,783 | ||
| 3 | 7.1 | 65640 | 198372 | 12,662 | 22,713 | 221,085 | ||
| 4 | 7.1 | 65640 | 264012 | 18,221 | 40,935 | 304,947 | ||
| 5 | 7.1 | 65640 | 329652 | 24,176 | 65,111 | 394,763 | ||
| 6 | 7.1 | 65640 | 395292 | 30,553 | 95,663 | 490,955 | ||
| 7 | 7.1 | 65640 | 460932 | 37,382 | 133,045 | 593,977 | ||
| 8 | 7.1 | 65640 | 526572 | 44,697 | 177,742 | 704,314 | ||
| 9 | 7.1 | 65640 | 592212 | 52,531 | 230,273 | 822,485 | ||
| 10 | 7.1 | 65640 | 657852 | 60,921 | 291,194 | 949,046 | ||
| 11 | 7.1 | 65640 | 723492 | 69,907 | 361,100 | 1,084,592 | ||
| 12 | 7.1 | 65640 | 789132 | 79,530 | 440,631 | 1,229,763 | ||
| 13 | 7.1 | 65640 | 854772 | 89,838 | 530,468 | 1,385,240 | ||
| 14 | 7.1 | 65640 | 920412 | 100,876 | 631,345 | 1,551,757 | ||
| 15 | 7.1 | 65640 | 986052 | 112,699 | 744,044 | 1,730,096 | ||
Benefits in Postal Life Insurance Vs PPF 15 yrs:-
Maturity Value in Postal Life Insurance – Rs. 17,80,000/-
Maturity Value in PPF -Rs. 17,30,096/-
In addition to Risk Coverage in PLI , the benefit of Rs. 49,904/
Key Differences Between PPF and Life Insurance:
| Features | PPF | Postal Life Insurance |
|---|---|---|
| Product Type | Investment | Insurance |
| Regulated By | The Government of India | Department of Post-PLI |
| Purpose | Savings and wealth creation | Financial protection for dependents in case of death |
| Eligibility | Resident Indian citizens | Govt. Employee and Professionals |
| Returns | Fixed interest rate (currently 7.1%) reviewed periodically | Variable depending on policy type. Bonus is declared every year |
| Tenure | 15 years (extendable in every 5-year blocks) | Between 5-40 years, whole life (80 years) |
| Investment Nature & Frequency | Monthly, Yearly, minimum one deposit per year- Maximum 1.5 Lakh per year | Monthly or Yearly- No Maximum yearly limit |
| Premature Closure | Allowed after 5 years with penalties | Allowed with surrender charges after 3yrs |
| Opening Facility | Banks or post offices | Any Post office or agents |
| Risk Coverage | No Risk coverage, In case of Death only deposit the amount with Interest | Yes , Risk Coverage, in case death full SA+ Accrued Bonus |
| Online Deposit | Yes Available | Yes Available |
Postal Life Insurance Vs PPF -Flexibility and Liquidity
Flexibility in Life Insurance PLI VS PPF
Life insurance policies are usually flexible, especially over the years for loans and surrenders.
Flexibility in PPF
PPF accounts offer more flexibility in terms of withdrawals and premature closures. While there’s a lock-in period of 15 years, individuals can make partial withdrawals from the 7th year onwards. Additionally, PPF accounts can be extended in blocks of 5 years after maturity, providing continued tax benefits.
Tax Benefits in PLI VS PPF
Tax Benefits of Postal Life Insurance
Postal Life insurance premiums qualify for tax deductions under Section 80C of the Income Tax Act, up to a specified limit. Moreover, the death benefit received by the nominee is tax-free under Section 10(10D), making it an efficient tax-saving instrument.
Tax Benefits of PPF
PPF contributions and interest earned are exempt from income tax under Section 80C. Furthermore, the maturity proceeds are also tax-free, making PPF an attractive option for long-term tax planning.
Postal Life Insurance Vs PPF -Risk Factors
Risks Coverage in Postal Life Insurance
Postal Life insurance policies provide the full risk cover of the sum assured amount in case of any mishappening with insurant. In the case of the above example in the case of the death of the policyholder in the 10th year Death benefit of Rs. 15,20,000 will be paid to the nominee of the policyholder.
Risk coverage with PPF
In PPF no risk coverage is covered and in case of the death of the account holder, only the deposit amount with interest will be paid to the nominee of the account holder. Like in the above example in case of the death of the account holder on the 10th year, the amount deposited with interest of Rs. 949046 will be paid to the nominee.
Suitability and Duration PLI VS PPF
Suitability of Life Insurance
Postal Life insurance is suitable for individuals with dependents and financial liabilities such as loans, mortgages, or children’s education expenses. It provides a safety net to ensure that your family’s financial needs are met even in your absence.
Suitability of PPF
PPF is suitable for individuals looking for a secure and tax-efficient long-term investment option. It’s ideal for retirement planning, education funds, or any other long-term financial goals where stability and tax benefits are paramount.
Why Should You Choose Life Insurance Over PPF?
In conclusion, both life insurance and PPF serve distinct purposes in an individual’s financial portfolio. Life insurance offers protection against unforeseen events and ensures financial security for your loved ones, while PPF focuses on long-term wealth accumulation with tax benefits. Now in the above examples and the additional risk coverage benefit of PLI will be understood that Postal Life Insurance Vs PPF – Is Better. Hence Postal Life insurance vs PPF, PLI not only provides risk coverage but also provides additional maturity benefits compared to PPF.
FAQs
- Is PPF better than Postal life insurance for tax-saving purposes?
- Both PPF and Postal life insurance offer tax benefits under Section 80C. The choice depends on your overall financial plan and investment preferences.
- Both PPF and Postal life insurance offer tax benefits under Section 80C. The choice depends on your overall financial plan and investment preferences.
- Can I have both Postal life insurance and a PPF account simultaneously?
- Yes, you can have both Postal life insurance coverage and a PPF account to address different financial needs and goals.
- Yes, you can have both Postal life insurance coverage and a PPF account to address different financial needs and goals.
- What happens to my PPF account if I move abroad?
- Non-residents are not eligible to open new PPF accounts. However, existing accounts can be continued until maturity, subject to certain conditions.
- Non-residents are not eligible to open new PPF accounts. However, existing accounts can be continued until maturity, subject to certain conditions.
- Are there any penalties for premature withdrawals from a PPF account?
- Premature withdrawals from a PPF account are subject to specific rules and penalties, such as a reduction in interest rates or partial withdrawal restrictions.
- Premature withdrawals from a PPF account are subject to specific rules and penalties, such as a reduction in interest rates or partial withdrawal restrictions.
- Which one is better between PPF and PLI?
- As per the above example you can check that PLI provides additional maturity benefits in addition to risk coverage during the 15yrs of investment period.
- As per the above example you can check that PLI provides additional maturity benefits in addition to risk coverage during the 15yrs of investment period.