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What is a Fixed Deposit Plan & What are the Benefits of Including it in your Investment Plan

dateKnowledge Centre Team dateJune 24 2021 views192 Views
Fixed Deposit and its Benefits | Buy the Best Savings Plan in India

India has eternally been recognized as the land of savers. It is that time of the year when people take a look at their finances, review their savings, restructure their investments, and evaluate carefully concerning the steps in which they can diversify, expand, and manage their investment portfolio.

While investment options are essentially customized as per the requirements, needs, and purposes of the investors, certain financial instruments are vital for every investment portfolio. One such investment plan is a Fixed Deposit (FD) given its amazing long-term benefits. Know how fixed deposits can help you develop a great investment plan.

What is a Fixed Deposit?

Even though fixed deposits as an investment option are questioned, it persists as one of the most intelligent decisions required to be on your investment list, even if you are a long-standing investor. A fixed deposit (FD) is an instrument for financial investment granted by Non-Banking Financial Corporations (NBFC) and banks. Investors can invest their funds and receive a higher interest rate than what you receive in a regular savings account.

It is one of the most fancied saving plan options that enable you to deposit your funds in a lump sum and further grow your investment savings with utmost security. Fixed deposits allow you to choose the sum that you wish to deposit along with the interest rate and tenure for which you wish to deposit these funds.

When you place your funds to engage in fixed deposits, you fundamentally secure the sum for a set duration. You can choose to receive the interest on the principal amount either throughout the duration periodically or get a cumulative sum at the end of the fixed deposit duration. The interest earned on the Fixed Deposits gets appended to the principal sum after each particular period.

Apart from this, as the tenures of FDs are flexible, you hold the alternative to handle several FD accounts at the very time disseminated across varying durations. In this way, you will be capable of gaining more on your investments.

4 Advantages of Including FD in an Investment Plan

Fixed deposits are among the most protected investment alternatives, particularly when you contrast them with stocks, equities, or any different market-linked investment instruments. With low to moderate volatility, the corpus you put aside by investing in FDs acts as an excellent way to assure that your funds are protected.

If you have just begun investing and venturing diverse investment options, then investing the very sum as your capital is an effortless way to diminish your risks and obtain a guaranteed sum at maturity. When it comes to investing in Fixed Deposits, return on investments is one of the principal aspects that numerous individuals concentrate on.

However, with the contemporary market advancements, the interest rates on the fixed deposits have been growing, making now a transcendent term to invest in a fixed deposit. In addition to this, the best FD product will always assist you in acquiring more out of your investment. Listed hereunder are some of the advantages of including Fixed Deposit (FD) in your investment plan.

1. Assured return on investment

The significant reason why countless people favor investing their money in a fixed deposit is the guaranteed return on investments. Once you invest your capital in an FD (Fixed Deposit) account, you can be assured of getting the returns with a fixed rate of interest.

Banks and financial institutions regularly issue the fixed deposit rate of interest on their portal and in the branches of banks and financial institutions that makes it effortless for clients to determine how much return they will receive.

In addition to this, Banks and financial institutions further hold an FD interest calculator on their portals. A client can determine the interest he/she will draw on investing a particular amount of money for a specific period.

2. Flexible term

The term of investing in fixed deposit (FD) is resilient, and it entirely depends on the deposit holder to fix the term of their deposits. While every bank and financial institution holds its own minimum term rules, the deposit holder can exercise the ultimate decision. It is additionally conceivable to determine whether to extend the Fixed Deposit for the same term and redeem the fixed deposit.

Read how and where to invest for good long-term returns?

3. Easy loans

An FD is a great financial instrument that you can keep aside for meeting your financial emergencies. Apart from this, you can easily take a loan against your fixed deposit. You can obtain a loan of up to 95 percent of your accumulated FD amount that can vary from bank to bank. This ease of receiving loans is what makes it the most dependable investment option.

4. Tax advantages

The Fixed Deposit interest or return you receive from your FD investments is exempted up to Rs 10,000 in one financial year. Apart from this, certain tax-saving fixed deposits hold a lock-in period of 5 years and are exempted under section 80C of the Indian Income Tax Act, 1961. with up to relief of Rs. 1.5 lakhs.

It can be concluded that investing in FD is one of the most rational decisions you can take to grow your savings and save your funds from market fluctuations. However, there might be a chance of loss of principal amount if you do not pick the accurate issuer.

If you are not sure of putting your money in a Fixed Deposit and you are looking for investing in saving plans that offer guaranteed returns, you will have a plethora of plans to choose from. Canara HSBC Oriental Bank of Commerce Life Insurance has a wide variety of savings cum protection plans that you can buy for securing your financial future. For example, Guaranteed Savings Plan offers guaranteed benefits such as regular monthly income, guaranteed yearly addition, and guaranteed loyalty addition. You may also avail of the loan facility to meet any contingency need that may arise once your policy acquires a Surrender Value. Whether you want to plan for the higher education of your child, or you want to build a retirement corpus for yourself, this savings plan is the perfect option that you may consider.

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Frequently Asked Questions (FAQs) for Life Insurance

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age:It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chances of contracting diseases is low. Young people also opt for policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender:The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits:The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term:Policy terms are also taken into consideration by insurers while deciding the premium amount. Policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation:The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physicianâ s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence. There are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: An insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the policy, the insurance companies generally pay 80% of the total premiums paid.

Buying life insurance online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. Online insurance policies also offer higher benefits. Customers should, however, buy online policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one policy to increase the cover or avoid claim rejection. In case of multiple policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In the case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in the case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term. The family receives the death benefit. In the case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment options are chosen the policy works as a source of regular income.

It is a popular misconception that life insurance is only for accidental deaths. A term life insurance plan like iSelect also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy life insurance in your early 20s because it’s is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy life insurance at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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