Life insurance is Protection First, Investment Second

Feb 22, 2019 | 6 months ago | Read Time: 3 minutes | By iKnowledge Team

Indians need to ensure that they are protected by a term plan first before they start analyzing life insurance as an investment option.

Life insurance is a financial tool to support the family of an insured’ person after his death. In a nutshell, it acts as a shield at a time when you require utmost protection and security. This is the reason insurance is poles apart from banking, investment or any kind of saving.

Any kind of insurance policy revolves around paying a nominal sum of money by large groups of people as a precautionary measure to protect their beneficiaries in their absence. Insurance aids in financial recovery, especially when the family isn’t prepared to tackle such an unforeseen situation.

The moment you pay the first instalment towards your insurance policy, the family comes under the umbrella of financial protection. This is the reason why most reiterate the importance of a life insurance policy.

The contribution that an insured person makes monthly, half-yearly or annually ensures your family lives a dignified life even when you are no longer around. It could also ensure financial protection when funding your child’s education, marriage or other important objectives.

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What is the issue with those who view insurance as investment?

Those who look at insurance as investment generally end up with an inadequate sum assured especially in times of need. In fact, they lose out on the simplest benefits of insurance planning. People who look for investment-oriented rewards through life insurance must consider it at a later point in life when they have enough savings over a period. For those who are in the early years of their work life need to concentrate on the insurance component.

Insurance is an expensive investment, but most people are in favor, since they believe it is a tax-saving instrument. When you invest, you generally expect to gain high returns, but when you invest in insurance-related products, your gains are limited. When you buy insurance, protection of your family becomes a priority, but when you mix investment and insurance, you pay a hefty sum as premium to financially secure your dependents.

What is the solution?

Firstly, one needs to understand that insurance policies necessarily do not have to give ‘returns’, in the way any form of investment does. Insurance providers often offer options such as term plans to cover your family in case of your sudden demise. The only difference is that this policy is applicable for a specific period and requires you to pay a nominal premium. Affordability plays an important part here, since it gives you maximum cover at a reasonable price, so that you do not have to shell out large amounts of money to protect your loved ones.

For some, this might be a deal-breaker, since they do not get anything back, but treat this plan as an umbrella. When it rains, you carry an umbrella to protect yourself. In the same way, when you contribute small amounts at fixed intervals, your family is covered by an umbrella when they need it the most. You are bound to need a large sum of money to live a comfortable life in case the breadwinner dies.  Companies like Aegon Life offer term insurance products like iTerm Insurance Plan that provide life cover for up to 100 years, ensuring long-term protection for your family. Besides, it can easily be purchased online and premiums are nominal even if you avail additional benefits. Besides, it also comes with a terminal illness benefit, wherein you get death cover benefits upon diagnosis plus your future premiums are also waived off.

You also have the option to go for monthly payouts or a lump sum amount, whatever suits your needs.

Since the intrinsic nature of an insurance product to protect your loved ones, it is better not to mix it with investment. After all, family comes first!

 

II/Feb 2019/4842

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