Timing for placing savings: the terms of bank deposits start from a month and rarely exceed several years. Endowment programs have longer terms - from several years to several decades. If a person enters into a retirement endowment contract at a young age, then the entire endowment program can last 20-30 or more years.
Return on investment: deposit rates are known in advance and are clearly stated in the agreement. During the term of the deposit, the profitability may change, but it is precisely known at least for the initial period of placement of funds. Insurance programs work differently. The client is offered a small pre-agreed return, plus an annual so-called insurance bonus is accrued – an additional return, the amount of which is determined based on the success of investment activities of the insurance organization. Ultimately, the endowment program may turn out to be either more or less profitable compared to a regular deposit.
Voluntariness: the depositor decides whether to make extra contributions to the deposit or not. Moreover, the bank may limit the possibility of making additional contributions, but then, if desired, the client can easily open another deposit and place additional money there. Deposits are voluntary. However, by concluding an endowment agreement, a person undertakes to regularly transfer a certain amount of funds to the insurer.
Early termination of the contract: bank deposit is revocable; the depositor can terminate the agreement early at any time and withdraw the money. Within the framework of endowment insurance programs, there is either no such opportunity at all, or it is very limited. An unusual situation may arise: it seems that a person has accumulated a decent amount of money, but they cannot use it.
Taxation: if a term of the bank deposit in rubles is less than 1 year, and the term of a foreign currency deposit is less than 2 years, you will have to pay income tax at a rate of 13% on the accrued income. However, return received within the framework of endowment is not subject to taxes; moreover, people who have entered into voluntary endowment agreements are entitled to a tax deduction in the amount of insurance premiums paid. Tax deduction is an amount that will not be subject to income tax. For example, if you transferred 1000 rubles to the insurer, in the future you will save 13% of this amount on taxes, that is, 130 rubles. Due to tax deduction, endowment programs ultimately turn out to be more beneficial than bank deposits. Summarizing the above, we can conclude that bank deposits and endowment programs are completely different products, despite some common features.
Endowment is a serious long-term instrument that allows you to accumulate an impressive amount for the distant future through regular, relatively small contributions. Deposit is, first of all, an opportunity to save already accumulated money, which in the foreseeable future can be spent, for example, on a large purchase, and it is also an excellent tool for protecting savings from inflation. A person can have a deposit and at the same time save money for their old age within the framework of endowment program.
Source: https://fingramota.by/ru/guide/practical/nakopitelnoe-strahovanie-ili-vklad
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