Life Insurance as Investments

Life Insurance?

Life Insurance is a powerful tool that's designed to financially secure your family's future, in the unfortunate event of your death.

The basic types of life insurance policies are Term insurance, Endowment policies, Unit Linked insurance plans or ULIPS, Whole life policy and Endowment policy.

Investments?

Investments are your assets created through savings. All Investment involves risk.

When you invest you take a risk, and the return derived from the investment is the reward for the risk undertaken.

Investments can be made in shares, stocks, bonds, fixed deposits and units of mutual funds.

ALL INVESTMENTS INVOLVE RISK.

So Insurance = Investment?

Insurance is a risk transfer mechanism, whereas investment is itself a risk undertaken to earn a return.

Most insurance plans sold as investments, like endowment plans and ULIPS, have provided inferior returns compared to other investment products.

Commissions earned by agents on such sales is also very high, sometimes as high as 30% of the premium ,which is the main reason why such policies are aggressively marketed as compared to traditional term plans.

Term insurance serves the real purpose of insurance. It's considered the best form of life insurance, premium for term plan is the cheapest compared to any other insurance plan.

The best advice thus is "Buy a term, and invest the difference."