PPF versus LIC Jeevan Labh

PPF (Public Provident Fund) a government-backed savings scheme, offers long-term stability and tax benefits. On the other hand, LIC Jeevan Labh, a traditional life insurance policy, blends life cover with potential bonuses. Let’s study the differences that make these two options unique and how you can benefit from either.

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Difference Between PPF and LIC Jeevan Labh

Public Provident Funds and LIC Jeevan Labh are different investment options, each serving a unique purpose. PPF focuses on building a savings corpus without providing life cover, while LIC Jeevan Labh is specifically designed to offer life cover in case of the policyholder's demise. Consequently, the significant dissimilarities between the two arise from their primary objectives and features. Let's explore the significant grounds that set them apart.

LIC’s Jeevan Labh vs. PPF

Criteria PPF LIC Jeevan Labh
Type of scheme Investment plus tax-saving  Life insurance plus savings
Who should buy it? Anyone looking for a high-interest savings scheme Primarily targeted for individuals with dependents
Rate of return The rate of return is fixed by the Government. Currently, the rate of return for 2022-23 is 7.1%  Lower than PPF and subject to company profits
Policy maturity 15 years 16 years/21 years/25 years
Loan facility From the 3rd financial year up to 6th financial year Only after two years’ premiums have been paid
Tax benefit EEE tax benefits (deposits, interest, and maturity amount are exempt from taxes). Premiums and maturity benefits are exempt from taxes under Section 80C and Section 10(10D) of the Income Tax Act, 1961, respectively.
Investment Amount Annual deposit of minimum - Rs. 500, and maximum - Rs. 1.5 Lakhs Premiums are fixed as per the sum assured. 
Death Benefit Not applicable Sum assured death is payable to the beneficiary assigned by the policyholder

Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.

“Tax benefit is subject to changes in tax laws. Standard T&C apply.”

Now that we are aware of the key differences between the two, let’s explore each option in some detail and see if there are any similarities.

Brief on Public Provident Fund (PPF)

The public provident fund is a government of India-backed long-term investment scheme that offers guaranteed returns. As a PPF account holder, you are expected to deposit an amount and receive interest on that investment at a rate annually revised by the government. The returns that you are entitled to allow you to maximize your savings and plan for your future goals. 

PPF, as a financial instrument, features a lot of attractive benefits for the account holder. Some of the most beneficial ones are:

  • Deposit Amount - The PPF scheme allows you to deposit a minimum sum of Rs.500 up to a maximum amount of Rs.1.5 Lakhs in a year. The minimum amount that has been set ensures affordability for people belonging to the low-income bracket. 

  • Rate of Interest - The rate of interest on your public provident fund is revised by the Ministry of Finance every quarter. For the current quarter, the interest rate is set to 7.1%. It is noteworthy that this is higher than most other schemes that are currently available. 

  • Tax Savings - The investment that you make is eligible for tax deductions. Further, the interest earned and the maturity proceeds are also exempt from tax under section 80C of the Income Tax Act 1961. 

About LIC’s Jeevan Labh Policy

LIC’s Jeevan Labh is an endowment-based life insurance policy. The primary purpose of the policy is to cover the risk of premature death of the life assured. The policy also comes with a savings aspect, wherein you are entitled to maturity benefits on surviving the duration of the policy. LIC Jeevan Labh offers guaranteed financial protection and offers the sum assured on death or maturity of the policy.

The policy offers the following benefits.

  • Death Benefit - Death benefit is payable on the death of the life assured. The sum assured on death is payable as either 7 times the annual premium or the absolute sum assured, whichever amount is higher. 

  • Maturity Benefit - Even on surviving till the maturity of the policy, the life assured receives an assured sum in the form of maturity benefit. 

  • Additional Bonus - LIC Jeevan Labh participates in the profits of the company, due to which policyholders receive simple reversionary bonuses and any final additional bonuses applicable. This extra sum is payable along with death and maturity benefit, however, is subject to company valuation every year. 

LIC Jeevan Labh vs. PPF - Common Grounds

While LIC Jeevan Labh and the Public Provident Fund are both vastly different in terms of their purpose and features, certain aspects show similarities between the two.

  • Reliability
    PPF is a government-backed scheme, which means it assures risk-free and guaranteed returns. Therefore, it is considered reliable and one of the safest savings policies in the country.
    LIC’s Jeevan Labh is offered by the government-owned entity, Life Insurance Corporation of India, which makes it a reliable product. LIC currently occupies the largest market share in the life insurance space, which can be attributed to it being trustworthy among the masses. 

  • Zero Market Risks
    Both LIC Jeevan Labh and the PPF scheme are non-linked products that make them free from market fluctuations. Therefore, the risk factors are significantly lower than market-linked investments. Both options are suitable for risk-averse individuals. 

  • Enhanced Savings
    Both LIC Jeevan Labh and PPF offer the scope of increasing one’s savings corpus. While your PPF account is a traditional savings scheme with a high-interest rate, LIC Jeevan Labh offers life cover with additional returns as a means for increased earnings. However, the rate of return for LIC policies is lower. 

  • Loan Facility
    Both the schemes allow policyholders to avail of loan facilities, subject to the sum assured and the deposit amount. However, the terms and conditions under each product differ, as discussed in the comparison.

  • Tax Benefits
    Policyholders of LIC Jeevan Labh can avail of tax benefits under the Income Tax Act of 1961. Similarly, with a PPF account, one can enjoy tax exemptions on the deposit amount, the interest, and the maturity payout. 

Summing up!

A PPF account allows you to make regular deposits, so you can grow a substantial corpus to fund future needs. With the LIC’s Jeevan Labh Policy, you can secure the financial future of your family in the event of your death. With both options, you earn additional benefits in the form of interest and bonuses. It's crucial to consider your financial goals, risk tolerance, and investment horizon while choosing between PPF and LIC Jeevan Labh. If you're looking for long-term savings with tax benefits and relatively stable returns, PPF might be suitable. On the other hand, if you want life insurance coverage along with some savings and potential bonuses, LIC Jeevan Labh could be an option

FAQ's

  • Q: Which one offers higher returns, PPF or LIC Jeevan Labh?

    Ans: PPF offers returns based on the government-set interest rate, which can vary over time. LIC Jeevan Labh provides returns in the form of bonuses, which may vary depending on the performance of LIC's participating funds. The actual returns would depend on the prevailing rates and bonuses declared.
  • Q: What is the lock-in period for PPF and LIC Jeevan Labh?

    Ans: PPF has a lock-in period of 15 years, which can be extended in blocks of 5 years. LIC Jeevan Labh typically has a policy term ranging from 16 to 25 years, depending on the plan chosen.
  • Q: Can I withdraw money from PPF or LIC Jeevan Labh before the maturity period?

    Ans: In the case of PPF, partial withdrawals are allowed from the 7th financial year onwards. For LIC Jeevan Labh, surrendering or withdrawing the policy before maturity may result in lower returns, especially in the initial years.
  • Q: Can I have both a PPF account and a LIC Jeevan Labh policy simultaneously?

    Ans: Yes, you can have a PPF account and LIC Jeevan Labh policy simultaneously, as they serve different purposes and have distinct features.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
++Returns are 10 years returns of Nifty 100 Index benchmark

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