Can I buy Life Insurance as an investment?
March 15, 2020
Purchasing life insurance is one of the best ways to protect and safeguard the financial future of your family. But apart from the assurance and security, should one consider life insurance an investment? Read this post to find out.
With the rising financial awareness in India, most people want to get something in return when they invest their money. This is one of the biggest reasons why options like equity and mutual funds are currently so popular in the country. This same mindset of generating returns often extends to life insurance too.
While the primary purpose of purchasing life insurance is to secure the financial future of your loved ones, should people also focus on generating returns when they buy life insurance? Should life insurance be considered an investment? Let us have a look.
Understanding Life Insurance
The basic concept of life insurance is that you pay a certain premium to the insurer and, in return, get life coverage of a fixed amount. In case you die within the policy tenure, the insurer will pay the death benefit to your nominee. This primary benefit of life insurance makes it one of the most important purchases in life for every individual wanting to secure the financial future of their family.
But with products like pure term insurance, if you survive the policy tenure, neither you nor your nominee will receive anything. On the other hand, there are other life insurance investment products which ensure that you receive something even in case you survive the policy duration. Some popular examples of such plans include:
- Term Plan with return of premium
- Whole Life Insurance
- Endowment plans
- Unit Linked Insurance Plans (ULIPs)
Why people purchase Term Insurance?
If term plans do not provide anything in return if the policyholder survives the tenure, why do people still purchase it over other life insurance options listed above? It is due to the primary benefit of buying life insurance - financial protection to the family in case of unexpected demise.
While there are other benefits like lower premiums, tax benefits, etc. most people purchase term plans for the assurance and security that they offer. Although there are now many different types of insurance plans that help you get something in return, if you survive the policy tenure, this primary benefit remains the same in every plan.
Should you buy Life Insurance as an investment?
People need to understand that generating returns is an add-on benefit of purchasing insurance products like endowment plans or ULIPs. While these options do help you receive something if you survive the policy tenure, this should never be seen as the primary reason to purchase such plans.
Life insurance is not an investment product and should not be treated as such. While you sure can consider an insurance investment plan like ULIP, endowment plan, or whole life insurance policy, do so only if they suit your insurance requirements and not due to their returns generating capability.
You can always consult a reputed insurer to know more about the different types of life insurance plans and better understand your insurance needs.
Customers can buy Life Insurance for investment, here.
Non-customers can check online Life Insurance premium, here.
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