Nowadays almost all of us use to buy some insurance plans and investment schemes too, motive of buying these plans vary from person to person, some buys insurance for secure future of his own after retirement, or for secure future of his family after his death, Many wants to save tax by investing in these plans. Many people take insurance as investment too but always keep in mind that insurance and investment should be planned separately and you also need to keep them separate.
Why not take insurance plan as investment plan?
If you are thinking that you can invest in an insurance plan and it will work as your investment plan too then please take a look at below example and then think again :-
Suppose you go and get an insurance policy, agent ask you to pay a premium of Rs. 35,000 per year and your policy will mature in 20 years, so your policy is worth of Rs. 7 Lakhs but you will get Rs 15 Lakhs at the time of maturity, well it sound very good as you are getting more than of double amount and will think to buy it. But wait,
If you go to your bank and ask for recurring deposit plan in which you are asked to pay same Rs. 35,000 per year and you will get interest of 9% p.a., yes on Recurring deposit you will get interest similar to of FD, Now calculate how much amount you will have at the end of 20 years, you wont believe but it will be Rs. 19,6154.
Yes its more than 4.5 Lakhs from your Insurance plan, you know why there is such a big difference? Its because when any agent sell a policy to you he will get commission, every year insurance company deduct a charge from your policy, So due to these charge and commission you will get low return.
Keep Insurance and Invest Plan Separate
As from above example its clear that if you wanna make investment then go with investment plans, but we also advice you to keep your both plan separate and don’t mix them, Why let see :-
- You should first buy insurance plans as they are more important because they provide a secure future for you if there is an uncertainty.
- If you mix your insurance and investment then it will become more and more difficult for you to track them.
- Insurance company charge mortality form you every year so basically you are purchasing insurance plan every year, but its not there in investment plan,
- By keeping insurance and investment plan, you can earn more and secure your future at the same time.
- Some insurance plans pays only if you dies not on maturity period.
What if Insurance and Invest are same and person dies?
Here if Mr. A at the age of 30 decided to buy a insurance plan for 20 years which will act as his investment too, He forget basic thing that insurance is mainly for covering situation when person dies so that insurance money help family, so here Mr. A take an endowment policy and think that he will get benefit (by getting money) out of it when he will retire, But at the age of 40 he dies, still there are 20 years left for his retirement but now his family will only get the death benefit (Which is usually small then a term policy on the same premium), and the accumulated savings called as surrender value will not be paid to the nominee.
Rather than putting money into a endowment plan if Mr. A has invested that amount in some other investment avenue then his family could have get both death benefit from the insurance company as well as the amount invested by Mr. A.
So what if Mr. A doesn’t died, Has he has made good choice?
No, see in insurance you will get lump sump amount which are difficult to save and lump sump money is very easy for expenditure, so in total it will not good for long run but if you invest in some popular plans then they will ensure a fixed monthly income which will help you to cover up your post-retirement cost or expense.
At last I only have to say that always keep you insurance and invest plan separate, and if you are thinking to buy both plans, of course separately then I will suggest that you should first go and buy insurance plan as it is more important for you and family and then look for investment plan.