LIC Vs. Mutual Funds
Life insurance and mutual funds are two very different products that are often compared when a person plans to invest their money. Following are some major differences between LIC and Mutual funds that will help you understand both much better.
Features
Life Insurance
Mutual Funds
Meaning
Life insurance is a pure protection plan that will secure your family financially in case of your untimely demise
Mutual Funds are a type of financial instrument created by a pool of investments from different institutions and individuals
Purpose
The main purpose of a typical life insurance policy is to safeguard the financial future of the family of the policyholder in case of his/her untimely demise
The main purpose of mutual funds is to generate returns on your investments to meet your long term financial goals
Liquidity
It takes care of the liquidity through its loan facility
Investors can liquidate their units at any given time
Risk involved
Life insurance comparatively involves less risk than other options
Since mutual funds’ investments are subject to market risks, hence the risk involved is also high
Tenure
The policy is in existence for a defined policy tenure
Mutual funds do not have any tenure. One can invest any amount at any point in time
Returns
Returns depend upon the policy type, but generally are low compared to the investments
Returns are significantly higher in long term
Rider benefit
Additional rider benefits are available under the policy
No rider benefits as such are provided under mutual funds
Diversification
There is no diversification option when you invest your money in just one plan
Mutual funds comprise many securities, hence making the portfolio of the investor diverse
Tax benefits
Tax exemption is up to a premium payment of Rs.1,50,000 under section 80c of the income tax act, 1961
ELSS mutual funds only qualify for tax exemptions under section 80c of the income tax act, 1961
Features | Life Insurance | Mutual Funds |
Meaning | Life insurance is a pure protection plan that will secure your family financially in case of your untimely demise | Mutual Funds are a type of financial instrument created by a pool of investments from different institutions and individuals |
Purpose | The main purpose of a typical life insurance policy is to safeguard the financial future of the family of the policyholder in case of his/her untimely demise | The main purpose of mutual funds is to generate returns on your investments to meet your long term financial goals |
Liquidity | It takes care of the liquidity through its loan facility | Investors can liquidate their units at any given time |
Risk involved | Life insurance comparatively involves less risk than other options | Since mutual funds’ investments are subject to market risks, hence the risk involved is also high |
Tenure | The policy is in existence for a defined policy tenure | Mutual funds do not have any tenure. One can invest any amount at any point in time |
Returns | Returns depend upon the policy type, but generally are low compared to the investments | Returns are significantly higher in long term |
Rider benefit | Additional rider benefits are available under the policy | No rider benefits as such are provided under mutual funds |
Diversification | There is no diversification option when you invest your money in just one plan | Mutual funds comprise many securities, hence making the portfolio of the investor diverse |
Tax benefits | Tax exemption is up to a premium payment of Rs.1,50,000 under section 80c of the income tax act, 1961 | ELSS mutual funds only qualify for tax exemptions under section 80c of the income tax act, 1961 |
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