Ask Mint | FD, PPF? Insurance bond may be better

Ask Mint | FD, PPF? Insurance bond may be better

The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.

Most of the foreign partners in the Indian market are well-established and strong global insurance players with a proven track record. In addition, all insurance companies in India are regulated by the Insurance Regulatory and Development Authority. The regulator has laid down very clear criteria defining the manner in which insurers can invest your funds. Insurers are also required to maintain a solvency margin. This is designed to ensure that companies can meet all their liabilities.

An insurance company has recently launched a product with 7% guarantee on maturity. Is it better to invest in a product such as this or in a public provident fund (PPF) or a fixed deposit (FD)?

Your investments should be based on your current needs and existing financial portfolio. FDs and PPF do have their own place. But there are a few factors to keep in mind.

The interest earned in the case of FD is taxable; PPF has an upper cap of Rs70,000 per individual per year and the rate of return is subject to revision. However, if you are able to invest in an insurance bond, it can meet both the concern areas, where your maturity benefits will be tax-free and typically there is no upper limit for investment. Further, it comes with the benefit of a life insurance cover—and your investments are safe too.

Readers are welcome to write in with their queries to The questions will be answered by senior executives from leading insurance firms.

This week’s expert is Bert Paterson, managing director and CEO, Aviva India.