Insurance Investment - Good or Bad
Insurance policies are for the family. Generally people take up insurance policies specifically life assurance and medi- claim policies in order to safeguard their family and secure their future. Some people go for gold, silver, property, share market but maximum go for a safe investment in insurance policies. One of the reasons of investment in insurance policies is that it offers tax benefits i.e. deductions in Section 80 of the Income Tax Act, 1961. Another reason is that insurance is a safe investment although with a lesser rate of return but guarantees a risk free return. Most of the assurance policies subscribed by people are for their children and their education.
Insurance policies are more or less a win- win situation but many experts argue on the point that these policies cannot be termed as good investments. They argue basically on the point that the rate of return is far lesser as compared to what other investments offer. The experts say that the life insurances are for safeguarding purpose and not for investing. When we safeguard we are not concerned about the rate of return or the tenure, we do it out of love and affection and thus are comfortable with whatever we get back in return. But this is not the case with investments because when we invest we look for the quickest and the highest rate of return. As a matter of fact our expectations automatically rise up.
Secondly, the experts also point out that the insurance policies come with too many unknown terms and conditions which might prove unfruitful when needed the most. For example, if a person has one lac rupees to invest, he should do it in gold or silver instead of insurance policies because gold is a readily marketable investment and is equivalent to cash. Liquidity is not lost in buying gold. Also the asset or investment stays in our hand but this is not the case with insurance policies. The policies come with a minimum time period of investment and only after that it can be en-cashed or surrendered. Another benefit of investing in gold or silver is that it gives a better rate of return and remains steady.
Many people contradict the above stance and say that insurance policies are the best investment options because it gives tax benefits from the start and even after maturity. People say that rate of return is a matter of concern if it is for merely earning but with plans both the purposes are solved. First, that savings take place in the form of premium which goes in installments rather than one time and second that their long life provides security. People argue that when investment can be done in installment for twenty years why invest one time and block money. They say that liquidity is affected if the investment is done in a single installment and also it requires huge amount of cash.
Insurance policies are a boon for everyone and some people use it for investment to suit their purpose and some use it only for safeguarding. It all depends upon the view point of a person and his capacity of investment.
Insurance policies are more or less a win- win situation but many experts argue on the point that these policies cannot be termed as good investments. They argue basically on the point that the rate of return is far lesser as compared to what other investments offer. The experts say that the life insurances are for safeguarding purpose and not for investing. When we safeguard we are not concerned about the rate of return or the tenure, we do it out of love and affection and thus are comfortable with whatever we get back in return. But this is not the case with investments because when we invest we look for the quickest and the highest rate of return. As a matter of fact our expectations automatically rise up.
Secondly, the experts also point out that the insurance policies come with too many unknown terms and conditions which might prove unfruitful when needed the most. For example, if a person has one lac rupees to invest, he should do it in gold or silver instead of insurance policies because gold is a readily marketable investment and is equivalent to cash. Liquidity is not lost in buying gold. Also the asset or investment stays in our hand but this is not the case with insurance policies. The policies come with a minimum time period of investment and only after that it can be en-cashed or surrendered. Another benefit of investing in gold or silver is that it gives a better rate of return and remains steady.
Many people contradict the above stance and say that insurance policies are the best investment options because it gives tax benefits from the start and even after maturity. People say that rate of return is a matter of concern if it is for merely earning but with plans both the purposes are solved. First, that savings take place in the form of premium which goes in installments rather than one time and second that their long life provides security. People argue that when investment can be done in installment for twenty years why invest one time and block money. They say that liquidity is affected if the investment is done in a single installment and also it requires huge amount of cash.
Insurance policies are a boon for everyone and some people use it for investment to suit their purpose and some use it only for safeguarding. It all depends upon the view point of a person and his capacity of investment.