LIC vs PPF

Home / Glossary / Saving Schemes / LIC vs PPF

Introduction

When it comes to long-term savings and securing financial stability, investors often compare LIC (Life Insurance Corporation of India) plans and PPF (Public Provident Fund). Both options cater to different financial goals, but they share some common aspects, such as tax benefits and stable returns. This guide provides a comprehensive comparison between LIC vs PPF, helping you decide which is the best investment option for you.

Understanding LIC and PPF

What is LIC?

The Life Insurance Corporation of India (LIC) is a state-owned insurance company that offers various insurance plans, including ULIPs (Unit Linked Insurance Plans), traditional endowment policies, and term insurance plans. LIC policies are designed to provide life coverage along with investment benefits.

What is the PPF Scheme?

The Public Provident Fund (PPF) is a long-term savings scheme introduced by the Government of India to encourage small savings while providing tax benefits. The PPF scheme is ideal for those looking for risk-free investment options with fixed interest rates and guaranteed returns.

LIC vs PPF – The Similarities

While LIC and PPF serve different purposes, they do share some similarities:

Long-Term Investment: Both LIC and PPF are suitable for long-term investments.
Tax Benefits: Investments in both LIC plans and PPF qualify for tax exemptions under Section 80C of the Income Tax Act.
Safe Investment Options: Both options are government-backed and considered relatively low-risk.
Fixed Returns: LIC traditional plans and PPF offer fixed returns, making them stable investment options.

You may also want to know NPS vs PPF

PPF vs LIC – The Differences

Factor	LIC Plans	PPF Scheme
Purpose	Insurance and Investment	Purely Savings
Returns	Depends on the plan (ULIP, Endowment, etc.)	Fixed returns (determined by the government)
Risk Factor	Low to moderate (ULIP carries market risk)	Almost risk-free
Tenure	Varies (10-30 years)	15 years (extendable in blocks of 5 years)
Tax Benefits	Premiums qualify under Section 80C; Maturity benefits tax-free (under certain conditions)	Investment, interest earned, and maturity amount are tax-free (EEE status)
Liquidity	Some plans allow partial withdrawals	Partial withdrawals allowed after 7 years
Loan Facility	Available against certain policies	Loan available from the 3rd financial year
Payout Options	Lump sum, periodic payments, or combination	Lump sum at maturity or withdrawals post lock-in period

PPF or LIC – Which is Better?

When to Choose PPF?

If you want risk-free, government-backed investment.
If you seek guaranteed returns.
If you want tax-free withdrawals.
If you are comfortable with a long lock-in period (15 years).

When to Choose LIC?

If you want life insurance coverage along with investment benefits.
If you prefer diverse investment options (ULIP, endowment, etc.).
If you want flexibility in tenure and premium payments.
If you are looking for maturity benefits and periodic payouts.

Popular LIC Plans for Investment

1. LIC Jeevan Labh

Combines savings and protection.
Offers a lump sum at maturity.
Suitable for long-term financial planning.

2. LIC ULIP Plans

Market-linked investment with life insurance.
Offers better returns with some level of risk.

3. LIC Traditional Plans

Endowment and money-back policies with guaranteed benefits.
Ideal for those seeking stability over high returns.

Tax Benefits under Section 80C

Both LIC and PPF qualify for tax deductions under Section 80C of the Income Tax Act. However, PPF follows an Exempt-Exempt-Exempt (EEE) taxation structure, meaning the investment, interest earned, and maturity amount are all tax-free. LIC, on the other hand, offers tax-free maturity benefits only if the sum assured is at least 10 times the annual premium.

Conclusion

Choosing between LIC and PPF depends on your financial goals. If you are looking for a safe, tax-efficient, and long-term savings option, PPF is a better choice. However, if you want insurance coverage along with investment benefits, LIC plans can be more suitable. Investors can also combine both options to balance risk, insurance needs, and returns effectively.

Ultimately, understanding your risk appetite, financial goals, and liquidity needs will help you make an informed decision.

Frequently Asked Questions

Which is better: LIC or PPF?

PPF is a better option for guaranteed, risk-free returns, while LIC provides insurance benefits along with investment.

Can I invest in both LIC and PPF?

Yes, you can invest in both to enjoy the benefits of insurance and tax-free savings.

What are the tax benefits of PPF and LIC?

Both qualify under Section 80C, but PPF follows an EEE taxation model, while LIC maturity benefits are tax-free only under certain conditions.

Does LIC offer better returns than PPF?

LIC ULIP plans may offer higher returns but come with market risk, while PPF provides fixed returns.

Can I withdraw money from PPF before maturity?

Yes, partial withdrawals are allowed after 7 years.

Is LIC safer than PPF?

PPF is a government-backed risk-free investment, while LIC plans may carry minimal risks depending on the type of policy.

Can I take a loan against my LIC policy or PPF?

Yes, both LIC and PPF allow loans, but the terms and eligibility differ.

What is the lock-in period for PPF?

PPF has a 15-year lock-in period, extendable in blocks of 5 years.

Open Free Demat Account

Related Terms

Explore our feature-rich web trading platform

Get the link to download the App