Insurance as Investment

To many of us, insurance may not be the best form of investment, but there are sufficient reasons making it a highly lucrative avenue to facilitate savings.

People often talk about yield on investment and tend to compare their values with those available on various insurance schemes. This is typical where one conveniently forgets the element of risk covered by life insurance. It is extremely unfair to compare the performance of insurance against other investments without considering the core features of insurance. The very essence of insurance is to protect us and our family from the uncertainties that happen in our lives. Hence it proves very logical to evaluate the costs involved towards this feature.

When we pay insurance premium for our car, do we get anything if fortunately no mishap happens? This means that we spent the amount to secure a valuable property. We must understand that out of the total amount paid for our life insurance, a certain amount is used for providing the risk cover and only the balance can be utilised as savings.In other words, the total premium paid less the amount evaluated as the cost of insurance must be considered as the amount invested to get the maturity amount.

We tend to think very unrealistically about our life. More than often, we compare the results after a tenor of an investment scheme, and we try to convince ourselves it is providing a better yield than an insurance policy. For instance, if you invest a certain amount and after 1 year our money will grow accruing a return. However, what if our death occurs in the first year itself? The premium paid can give us an insurance cover up to a certain sum (depending upon the plan, age, etc) and this amount shall become available to the nominee of the policyholder.

Now how do you compare the yields in such a situation?


"Not everything that counts can be counted, and not everything that can be counted counts." - Albert Einstein