LIC vs FD 2026: Which Gives Better Returns After 20 Years?

Investing in the right option is crucial for a secure financial future, and it's essential to compare LIC vs FD to determine which one provides better returns after 20 years.

In India, 2026, investors are looking for the best investment options to secure their financial future. Two popular options are LIC policies and Fixed Deposits (FD). While both options have their advantages and disadvantages, it's essential to compare them to determine which one provides better returns after 20 years. LIC policies, such as Plan 715 and Plan 736, offer a combination of protection and savings, with a guaranteed sum assured and bonus rates. For example, Plan 715 offers a bonus rate of ₹51 per ₹1,000 sum assured, while Plan 736 offers a bonus rate of ₹55 per ₹1,000 sum assured. On the other hand, FDs offer a fixed interest rate, with returns ranging from 5-7% per annum, depending on the bank and tenure. To calculate the XIRR return, we can use the formula: XIRR = (Final Value / Initial Investment) ^ (1 / Number of Years) - 1. For example, if we invest ₹1 lakh in an FD with an interest rate of 6% per annum for 20 years, the final value would be approximately ₹3.21 lakhs, with an XIRR return of around 6% per annum.

In contrast, LIC policies offer a combination of protection and savings, with a guaranteed sum assured and bonus rates. For example, if we invest ₹1 lakh in Plan 715 with a sum assured of ₹1 lakh and a bonus rate of ₹51 per ₹1,000 sum assured, the final value after 20 years would be approximately ₹2.51 lakhs, with an XIRR return of around 5.5% per annum. However, it's essential to note that LIC policies also offer a Maturity [मैच्युरिटी] benefit, which can provide a lump sum amount at the end of the policy term. To calculate the Maturity benefit, we can use the formula: Maturity Benefit = Sum Assured + Bonus + Final Addition Bonus. For example, if we invest ₹1 lakh in Plan 736 with a sum assured of ₹1 lakh and a bonus rate of ₹55 per ₹1,000 sum assured, the Maturity benefit after 20 years would be approximately ₹3.05 lakhs.

LIC Policies: An Overview

LIC policies offer a combination of protection and savings, with a guaranteed sum assured and bonus rates. For example, Plan 715 offers a bonus rate of ₹51 per ₹1,000 sum assured, while Plan 736 offers a bonus rate of ₹55 per ₹1,000 sum assured. The Premium [प्रीमियम] for these policies can range from ₹1,000 to ₹50,000 per annum, depending on the sum assured and policy term. To calculate the Premium, we can use the formula: Premium = (Sum Assured x Rate x Term) / 1000. For example, if we invest ₹1 lakh in Plan 715 with a sum assured of ₹1 lakh and a policy term of 20 years, the Premium would be approximately ₹1,500 per annum.

• Plan 715 offers a bonus rate of ₹51 per ₹1,000 sum assured
• Plan 736 offers a bonus rate of ₹55 per ₹1,000 sum assured
• The Premium for these policies can range from ₹1,000 to ₹50,000 per annum

FDs: An Overview

FDs offer a fixed interest rate, with returns ranging from 5-7% per annum, depending on the bank and tenure. For example, if we invest ₹1 lakh in an FD with an interest rate of 6% per annum for 20 years, the final value would be approximately ₹3.21 lakhs, with an XIRR return of around 6% per annum. The interest rate for FDs can vary depending on the bank, with some banks offering higher interest rates for longer tenures. To calculate the interest rate, we can use the formula: Interest Rate = (Final Value / Initial Investment) ^ (1 / Number of Years) - 1. For example, if we invest ₹1 lakh in an FD with a final value of ₹3.21 lakhs after 20 years, the interest rate would be approximately 6% per annum.

• FDs offer a fixed interest rate, with returns ranging from 5-7% per annum
• The interest rate for FDs can vary depending on the bank
• Some banks offer higher interest rates for longer tenures

Comparison of LIC Policies and FDs

Both LIC policies and FDs have their advantages and disadvantages. LIC policies offer a combination of protection and savings, with a guaranteed sum assured and bonus rates. However, the returns may be lower compared to FDs. On the other hand, FDs offer a fixed interest rate, with returns ranging from 5-7% per annum. However, FDs do not offer any protection or savings component. To compare the two options, we can use the formula: XIRR = (Final Value / Initial Investment) ^ (1 / Number of Years) - 1. For example, if we invest ₹1 lakh in an FD with an interest rate of 6% per annum for 20 years, the final value would be approximately ₹3.21 lakhs, with an XIRR return of around 6% per annum. In contrast, if we invest ₹1 lakh in Plan 715 with a sum assured of ₹1 lakh and a bonus rate of ₹51 per ₹1,000 sum assured, the final value after 20 years would be approximately ₹2.51 lakhs, with an XIRR return of around 5.5% per annum.

• LIC policies offer a combination of protection and savings
• FDs offer a fixed interest rate, with returns ranging from 5-7% per annum
• LIC policies may offer lower returns compared to FDs

Tax Benefits of LIC Policies and FDs

Both LIC policies and FDs offer tax benefits. LIC policies offer tax benefits under Section 80C of the Income Tax Act, with a deduction of up to ₹1.5 lakhs per annum. FDs also offer tax benefits, with interest income taxable under the head 'Income from Other Sources'. However, the tax benefits of FDs may be lower compared to LIC policies. To calculate the tax benefits, we can use the formula: Tax Benefit = (Premium x Rate x Term) / 1000. For example, if we invest ₹1 lakh in Plan 715 with a sum assured of ₹1 lakh and a policy term of 20 years, the tax benefit would be approximately ₹15,000 per annum.

• LIC policies offer tax benefits under Section 80C of the Income Tax Act
• FDs offer tax benefits, with interest income taxable under the head 'Income from Other Sources'
• The tax benefits of FDs may be lower compared to LIC policies

Conclusion

In conclusion, both LIC policies and FDs have their advantages and disadvantages. LIC policies offer a combination of protection and savings, with a guaranteed sum assured and bonus rates. However, the returns may be lower compared to FDs. On the other hand, FDs offer a fixed interest rate, with returns ranging from 5-7% per annum. However, FDs do not offer any protection or savings component. To choose the best option, it's essential to consider your financial goals and risk appetite. If you're looking for a combination of protection and savings, LIC policies may be a better option. However, if you're looking for a fixed interest rate, FDs may be a better option. To calculate the XIRR return, we can use the formula: XIRR = (Final Value / Initial Investment) ^ (1 / Number of Years) - 1. For example, if we invest ₹1 lakh in an FD with an interest rate of 6% per annum for 20 years, the final value would be approximately ₹3.21 lakhs, with an XIRR return of around 6% per annum.

Comparison of LIC Policies and FDs