Finance

Everything You Need To Know About Mixing Insurance & Investment

Everything You Need To Know About Mixing Insurance & Investment

Everything You Need To Know About Mixing Insurance & Investment

Making long-term investments and generating profitable returns is no longer a prerogative of the few. Similarly, insurance is used as a separate avenue for securing your financial needs and responsibilities. But, can you seek profitability through investment in insurance?  Yes, you can!

Let’s talk about insurance plus investment together and the favourable returns that they generate.

Why You Need Life Coverage Through Insurance? 

You need insurance coverage to secure your family’s future. Insurance gives you the financial security against the risk of losing your household income and allows you to fulfil your personal goals (also including your family’s goals). While deciding on your life insurance cover, it is important that you consider your present life status and also your future lifestyle.

The total sum insured through a life insurance coverage must include your estimated requirements (of educating your child, child’s marriage, property loan to be paid, etc.). The sum assured should ideally be huge so that, after you, your family does not have to compromise financially.

So, which life insurance cover is most suitable to compensate your absence? Pure life cover or term insurance can be used to guarantee financial access to your family. When you are no longer present, your family receives immediate financial aid through term insurance.

Moreover, pure life cover is a must since it is the cheapest form of life insurance. In exchange for a nominal premium, you can provide financial comfort and relief to your dear ones.

What About Growing Your Money?

While a term cover can secure the future of your family, there still exists the need to grow your idle funds. You need to invest in a way that it maximises your returns over time. Therefore, the growing popularity of market-linked investments makes sense in this case.

Such investments, on an average, give you a return of at least 12 percent over a period. These returns are much higher than the declining rate of interest on bank FDs or Government bonds.

The Choice Of Insurance and Investment: 

As you can see, both insurance and investments are a necessity. Both ways, you seek to secure your income growth.

Given below are two instances of investment avenues: (Read on to know which option can benefit you)

  1. Only insurance
  2. Insurance + Investment

Instance 1:

Let us pick the example of insurance as your investment first. If you have taken a loan to buy a property, you need to remit a part of your monthly income to pay your home loan.

What happens, if you are not there? How will your family deal with the outstanding debt? It can be guarded through a term insurance cover. The insurance company will pay a fixed sum to your family after your sudden demise, thus, securing your emotional interest and responsibilities.

Instance 2:

Now, let us take an example of your expenditure. Every family has needs and requirements. For example-funding your child’s education. If you put money in a fixed deposit, it will give you fixed returns. Yet, at the same time, the cost of education may escalate by the time your child turns 18.

Now suppose you have an option to invest the same amount and allow it grow phenomenally through an insurance + investment vehicle. This smart decision has the following benefits:

  • It will allow your money to grow based on market conditions
  • If you let your fund rest for 10-15 years, it will fetch you high returns. You also have an option to withdraw as per the market performance
  • You have an added benefit of sum assured (insurance) through the same channel of investment

If you prefer these three options in one investment plan, then, ULIPs (Insurance + Investment) should be your choice.  So, what are ULIPs and how do they benefit you?

In ULIPs, your annual premium amount is determined first followed by your choice to invest in equity and debt related funds.

Moreover, ULIP plans, along with providing insurance coverage, provide you with stable returns on your investment.If the policy owner passes away during the policy tenure, the sum assured is paid to the family. Whereas, in case of maturity of the policy, the maturity amount is paid, based on your choice of investment in equity or debt.

Life is full of risks and uncertainties. Only by creating a balance between your investment choices and risk-appetite, can you create a favourable life equation for yourself and your loved ones.

Life must continue, and your presence must be felt even when you are not there. This can be only done by mixing insurance and investment. It is the ultimate thing to do.

About the author

John Paul

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