Many financial headlines and social posts are talking about how Life Insurance Corporation of india (LIC) products could deliver higher returns than traditional bank FDs or RDs over the long term. What they’re referring to is not a literal FD replacement, but rather insurance products with savings and investment features that may give better long-term growth than basic deposit schemes.

📌 1. lic Does Not Offer Bank‑Style FDs

LIC does not provide traditional Fixed Deposits like banks do. Instead, it offers insurance plans with savings/investment components — often called FD‑like guaranteed income plans because they aim to provide steady returns with low risk.

These can include:

• Savings‑linked insurance plans
• Guaranteed income plans
• Money‑back or maturity benefit policies
• Non‑linked, non‑participating plans where returns are partly defined by guaranteed and bonus additions

Because these products aren’t bank FDs, their return structure is different — and the reported returns often represent an effective annualized return (IRR) after bonuses and maturity benefits, not a simple interest rate like in an FD.

💡 How lic Returns Compare to FDs/RDs

✔ LIC’s FD‑like Insurance Plans

These lic plans have features like:

• No direct market risk
• Guaranteed additions and maturity benefits
• Long lock‑in period
• Returns calculated as effective annual yield (not simple interest)

Some sources claim certain lic plans may deliver an effective return in the ~8% range in 2026, especially when maturity payouts, guaranteed additions, and loyalty/bonuses are factored in.

However:

• These returns are not directly guaranteed as a fixed interest rate every year.
• The actual return depends on the policy term, your age when you buy it, and the type of plan.

✔ Bank FDs and RDs

• Bank FDs and RDs offer a fixed interest rate for the chosen tenure.
• Typical FD rates in 2025–26 are around 7–8% per year, but they are fully taxable and may not beat inflation in real terms.

A financial expert note: if inflation is around 7–8%, traditional FD returns may just match or even lag inflation, meaning the real (after‑inflation) growth could be minimal. Meanwhile, long‑term investment products like equities or long‑term plans may offer better growth potential.

📊 Examples of lic Plans Investors Look At

LIC offers many different products, but some categories often mentioned include:

🔹 Guaranteed Income Plans

Some policies offer fixed or deferred income for life or maturity benefits that are seen as investment plus insurance.

🔹 Savings & Money‑Back Plans

These pay portions of the sum assured at intervals and give bonuses at maturity — often presented as attractive long‑term savings.

🔹 Unit‑Linked Insurance Plans (ULIPs)

Plan like LIC Index Plus allow your funds to be invested in market‑linked assets, with growth tied to performance of selected fund options.

🔹 Mutual Fund Options via lic MF

LIC Mutual Fund’s equity and hybrid funds have shown strong long‑term returns in some categories (e.g., infrastructure funds with >20% returns over certain periods), though these are market‑linked and not guaranteed.

📌 Key Differences: lic Plans vs FDs/RDs

Feature

Bank FD/RD

LIC Insurance Plans

Market Risk

Low

Low (traditional) to Medium (ULIPs)

Return Type

Fixed interest

Guaranteed additions + bonuses or market‑linked

Liquidity

Medium – can be broken early

Low – long lock‑ins and surrender charges

Taxation

Taxable interest

Insurance benefits may be tax‑exempt under certain conditions

Insurance Benefit

No

Yes (life cover included)

Long‑term Growth Potential

Limited

Can be higher if held long‑term

👉 LIC plans aim to blend insurance with investment growth, whereas FDs only offer fixed income. The potential “bumper returns” often referred to in headlines relate to long‑term effective growth, not guaranteed fixed interest like an FD.

📌 What You Should Consider Before Investing

✔ Your Goals: Are you more interested in capital growth, stability, or insurance coverage?
✔ Time Horizon: lic policies are usually long‑term — early withdrawal can reduce benefits.
✔ Tax Treatment: Some insurance maturity/proceeds may not be taxable if conditions are met.
✔ Risk Appetite: ULIPs and some lic MF related products can fluctuate with markets.

✅ Bottom Line

• LIC doesn’t offer typical bank FDs/RDs, but it does provide guaranteed income or savings‑linked insurance products that can deliver competitive long‑term returns and insurance coverage.
• Headlines like “say goodbye to FDs/RDs” reflect a comparison between fixed, low FD interest and potentially higher long‑term growth from lic products that blend savings, bonuses, and guaranteed features.
• Whether lic is “better” depends on your financial goals, investment horizon, and risk tolerance — sometimes a mix of insurance, deposits, mutual funds, and other instruments works best for diversified planning.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.