LIC vs Mutual funds

LIC vs Mutual Fund: Which is better?

Investing is no longer regarded as affluent. It has become a necessity to secure one’s future. Let’s compare LIC vs Mutual Fund to help you decide which is the better choice for you.

What are LIC plans?

The government owns the insurance and investment company Life Insurance Corporation of India (LIC). It satisfies individual insurance needs by providing customized policies.

LIC is a pioneer in the insurance sector and one of the oldest providers of life insurance.

A family is protected by life insurance from unanticipated occurrences like death. It aids in safeguarding a family’s financial future.

The main goal of life insurance is to provide “death benefits” to the dependents in the event that the family’s breadwinner passes away too soon.

Benefits under LIC plans

The benefits covered under LIC insurance are as follows:

  • Risk coverage: The greatest benefit of LIC insurance plans is that it provides risk coverage. It helps you with finances during traumatic events like unplanned death and ensures your loved ones are taken care of financially in such a situation.
  • Financial security: It provides you with financial security. It reassures you that your loved ones are protected and secured.
  • Building financial corpus: It helps you build a financial corpus that can help you secure your family’s needs and wants in the future. It safeguards their financial needs to the fullest.
  • Tax benefits: The LIC covered to INR 1.5 lakhs per annum is completely tax-free under Section 80C of the Income Tax Act, 1961.
LIC vs Mutual funds. Which is better

What are Mutual Funds?

A common kind of investing, mutual funds aggregate client funds to invest in a variety of securities, including stocks, bonds, and money market instruments.

Mutual funds are governed by the Securities Exchange and Board of India (SEBI). Investors have access to expert fund management via mutual funds.

The investment decisions are made by the fund management team after careful consideration of the fund’s goal. This skilled management enables assets like bank savings accounts and fixed deposits to outperform more conventional ones.

Mutual funds come in two basic varieties: equity and debt mutual funds. Equity-related products and equity are the main investments of equity mutual funds. Large-cap, mid-cap, small-cap, multi-cap, sectoral or thematic, tax-saving, etc., are a few of the several types of equity funds.

Debt mutual funds, on the other hand, invest in corporate bonds, government securities, and other financial products. Liquid funds, dynamic bond funds, short-term and ultra-short-term funds, and others are some of the several forms of debt mutual funds.

Benefits of Mutual Funds

The following advantages are included with mutual funds:

  • Proper fund management: Mutual Funds are managed by professionals and reputed companies like Asset Management Funds. They carry out extensive research and time the market to ensure that the fund performs well.
  • Easy to Invest: Mutual Funds are great for people looking for easy investments. Mutual funds are managed by fund managers which means you do not have to monitor the market or adjust your stocks. The manager makes all the necessary decisions to secure your money.
  • SIP options available: You can start a SIP for Rs. 100 or 50,000! That is the biggest benefit of starting a SIP in a mutual fund, you can decide the amount when to debit the money, when to pause, and when it steps up the amount.
  • Better returns: Mutual funds have the potential to beat the market and inflation. They give you better returns than your FD, PPF, or savings account. However, there are market risks that can affect your returns.
  • Diverse categories for investment: There are different kinds of mutual funds that you can invest in. Equity, debt, and index funds to make the most of your savings.
  • Affordable investments with easy payment options: Mutual funds are affordable. From a student to a risk-averse investor to a financial advisor, anyone can invest in mutual funds.

Comparison of LIC vs Mutual Fund

Following is the difference between mutual funds vs LIC plans

FeaturesLIC Mutual Funds
MeaningA pure protection strategy like life insurance will provide your family with financial security in the event of your untimely passing.A pool of investments from many institutions and people is what gives rise to the financial instrument known as mutual funds.
PurposeA conventional life insurance policy’s primary goal is to secure the financial future of the policyholder’s family in the event of an unexpected death.Mutual funds’ primary goal is to increase the return on your assets so that you may achieve your long-term financial objectives.
LiquidityThrough its lending facility, it manages liquidityInvestors are always free to sell their shares.
Risk involvedComparatively speaking, life insurance is less risky than the alternatives.The risk involved is substantial since investments made through mutual funds are susceptible to market hazards.
TenureThe policy has an established policy tenure.The tenure of mutual funds is nonexistent. Any amount can be invested at any time.
ReturnsReturns vary depending on the type of insurance but are often modest in comparison to investments.Long-term returns are much higher
Rider benefitThe policy has additional rider benefits.Mutual funds do not offer rider perks as such.
DiversificationWhen you put all of your money into one plan, there is no way to diversify your investments.Mutual funds include a variety of securities, which broadens the investor’s portfolio.
Tax benefitsSection 80c of the Income Tax Act of 1961 exempts up to INR 1.50 lacs in premium payments from taxation.Only section 80c of the Income Tax Act of 1961 applies to ELSS mutual funds when it comes to tax exemptions.

LIC vs Mutual fund. Which is better?

Life insurance is a must. In the case of the insured’s untimely death, it offers the family financial security. But investment is just as significant.

It aids in the development of a corpus that enables one to live comfortably and achieve all of one’s ambitions. People frequently mix up their needs for investments with insurance, which is a mistake. 

Financial experts advise investing in mutual funds and purchasing term insurance for insurance needs as a cheaper alternative that will also contribute to long-term wealth growth.

Since SEBI regulates mutual funds and also establishes an upper ceiling on the expense ratio, the costs are capped.

Mutual funds also have the potential to provide better returns than life insurance plans with an investment option since they invest in a variety of asset classes.

Each person has their own style of thinking and attitude while making investment plans. Some people desire financial security, whilst others desire higher returns.

Before making any type of investment, including those in mutual funds or LIC policies, it’s crucial to evaluate your financial situation.

Consult an expert advisor to get the right plan

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