Is Insurance an Investment?

This article answers the question of whether insurance is investment or not.

Mohit was on cloud nine that he had finally got his dream job. He had spent several years studying engineering and wanted to get this job in a blue chip company. Finally, the D-Day had arrived; on the 30th of that month, Mohit got an SMS informing him that his salary had been credited to his bank account. 

When Mohit’s father first heard this news, he had just one piece of advice for his son- buy a life insurance plan from your first salary. During the first five minutes of the conversation that Mohit  had with his papa, the former understood perfectly why insurance is like an investment and not a costly activity. It was clear to him that by buying a plan, his wealth doesn’t necessarily multiply but he could still save a lot of his income by way of several  Income Tax schemes available for policyholders.

By buying an insurance plan, Mohit would be securing the future of his wife and children. At some point in his life, Mohit would marry and have children. By having insurance cover, his wife and children would not have to worry about an uncertain future in the event of Mohit not being around. The most important reason why people buy insurance is to secure the future of their loved ones.

There is another reason why buying insurance is like investing. When you buy insurance, you also save on your tax liabilities. The income tax department gives you benefits on your tax if you have a life insurance plan. There are some specific sections in the Income Tax Act (Section 80C) that lets you leverage your insurance.

If you are planning to raise funds for your house or want to buy another asset, you can use your insurance as some kind of collateral. You could also use your insurance to settle an old debt, auto loan or a personal loan. 

Also,read- What are insurance aggregators?

Do you have any queries regarding insurance? Leave your query in the comment box.