Mutual fund sahi hai” campaign of insurance companies.Council, which is the body that represents companies in India, is going to launch a campaign to promote the idea that policies are a must have for Indians. It has been called the “
The campaign slogan is “Sabse Pehle”. Catchy. The tag line literally means “Before all else, ”. What does this have anything to do with you as an investor or a potential buyer of insurance policies?
Buyer not investor
The semantically inclined amongst you must have noted we said “buyer” of insurance policies and not “investor”.
This is an important point to note because as we have mentioned in other articles, we are often “sold” insurance as a savings product rather than a protection product. Insurance is not for the investor in you but the individual and family man in you. Insurance protects your dependents and your(non-financial) from uncertainty.
Why an expense?
An expense is basically when you buy something, or a benefit, for money. In the case of insurance, you are buying protection against uncertain events that might impact your future plans or commitments.
You should not discount the possible impact of improbable events and that is why you plan for them. Most likely most of us won’t meet an untimely end. But as morbid as it sounds, we can’t completely discount the possibility.
A life Insurance policy is thus a way to protect your earnings in case we are no longer around to earn.
Too much may depend on our ability to earn when our family and close ones depend on those earnings. Apolicy is thus a way to protect your earnings in case we are no longer around to earn.
The insurance company that allows this protection takes the chance that an untimely demise is a low probability event. It has sophisticated systems in place as well as actuarial professionals who assess risk and know that there is a certain sum, they can charge you, given the insurance amount that could be a potential pay out.
The risk is merely transferred from you to the insurance company. You pay for this service. That’s the insurance premium.
Why not an investment?
Insurance products when touted as this article.products mix two different things. Both insurance and are requirements but buying pure insurance is orders of magnitude cheaper than buying insurance + products like endowment plans. We have shown the difference in
It’s better to rate of return, not to mention risk exposure. Most insurance products posing as solutions don’t offer the right kind of return that is required, especially for long term goals.separately as you would have different goals which require different time periods and
Assumption for a 30-year-old male who “” in a non-term insurance policy:
They offer short term fixed income kind of returns for a long-term requirement. This is not great for your financial plans. So do the smart thing. Separate yourand insurance as you are unlikely to achieve either of your goals if you don’t do so. It is cheaper and smarter to buy pure insurance depending on your needs. For goals, smartly rather than buying insurance.