With increasing insurance and investment options these days, most of the people opt for either of them. As much as we agree, the two in one way or the other offer a way to secure the future and stabilize our tomorrow. However, both of them are entirely different from each other. The motivation of buying these plans varies from individual to individual. Both the plans are different in nature and cannot be treated or comprehended as the same thing. There are a lot of people who have been mixing up the concepts of these two.
Here is why people have been mistaking investment to be an insurance. The status of a tax-saving instrument is given to the insurance plans, which has provoked people to invest in insurance. The common treatment of taxes is why some people compare the concepts and profits of insurance and investment. In the end, in conclusion to their comparison, they often end up buying investment products which are insurance-based.
How Are Insurance And Investment Different?
The concept of investment is to make your money work for yourself. In investment, people put their money in a financial venture or an investment instrument and expect greater returns and make profits off it. It means that the person is expecting their money to grow or to make more money for them.
There are two types of investment types:
One is, which has more possibility of returning people the expected value and assured returns while the second type returns the value which is not fixed or certain, instead this value is indicative.
A person can invest on either of the two, considering their risk factor that how much risk they can take at this particular stage of life and with that, they can evaluate which investment to make.
On the other hand, the concept of insurance is basically, risk management. This tool can be used in order to transfer the financial implication of a possible loss. The insured incurs an expense which is commonly called, premium. It is a small amount spent to protect and safeguard themselves or their families. With insurance, people prevent themselves from experiencing a financial risk which is possible to occur in the near future due to the loss of an entity or the entire life.
Consider the example of life insurance. Today, more and more people are opting for it, just to increase their financial security. When the primary person or finance-bearer of a family dies, with him the source of income diminishes and there is no more flow of income for that particular family. The family and the dependents are then, left financially vulnerable. A considering and suitable life insurance policy helps the family and dependents to have enough financial support, covering up their current and future financial requirements.
It is wrong to mix up these concepts because of several reasons. For one, it is an expensive option. It might cause people more loss than it would profit them as a large part of the premium paid, in fact, goes for the commission. Investing in an insurance product kills the purpose of the whole idea of insurance.
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