Life insurance is not an investment. Period.
Comparing insurance and investments and trying to pick either of two (or combining them) – is one of the biggest reasons why most people are unable to:
- Save enough
- Invest properly
- Have an adequate insurance coverage
I assume that most of you know that you need to keep insurance and investments separate – i.e. its always about Insurance Vs Investment.
But if you have your doubts, then read on.
Any well thought out financial plan should include the following:
And one should not try to mix the three.
But unfortunately, the lines that differentiate between insurance, savings and investments are often blurred.
In India, insurance plans that double up as investments are extremely popular. So apart from the life cover that is available during the policy tenure, there are endowment policies that return a lump sum at maturity. Then there are Money-back policies that offer regular payouts at fixed policy intervals and one final payout at maturity. And there are hundreds of variants of these two popular insurance products.
But people buying an endowment plan or a money back policy don’t understand that they are not getting the best of both worlds by buying a hybrid product (that combines insurance with investments).
Instead, they are getting a product that is neither a good investment nor a good insurance.
Ofcourse, it is convenient to have just one product that takes care of everything.
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