Investing or Insurance – What should you prioritize?

Allocating the product, however inadequate, should serve as a good starting point and must come along with a commitment to shore up contributions as and when it is financially feasible.

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Health insurance seeks to alleviate the financial burden associated with medical expenses.

Investments and insurance are two important pillars of financial security. While good investments empower you to live the upside that life has to offer, adequate insurance experts say insulates your finances against the downside of risks to life. 

Nirav Karkera, Head – Research, Fisdom says, “While it is important to have the best of both, the limited financial ability may push one to prioritise one over the other. At least till both can be provided for. The decision can be made easier through rational and logical considerations.”

What is the use of each?

The first step is understanding the key purposes that each product seeks to achieve. Karkera explains, “An investment typically seeks to offer purchasing power at a future point in time, often for a specific financial goal. Within insurance, the pure life cover product that term insurance is seeks effective substitution of financial contribution to one’s dear ones in case of one’s demise.” 

Health insurance seeks to alleviate the financial burden associated with medical expenses.

Next, one needs to prioritise purposes basis the context of an individual’s life dynamics. For instance, experts say a person with no financial dependents may not need to ensure income substitution in case of an untimely demise, but must absolutely prioritise health insurance for a financial cushion in case of unforeseen medical expenses and then seek to invest towards financial security. Karkera points out, “For one with a family that is financially dependent on the person, it makes sense to prioritise health insurance for the family along with an adequate life cover through term insurance and then invest toward the family’s financial security.” On the other hand, for one already covered adequately under an organisation provided, family floater or individual health insurance cover and with no financial dependents, investing takes the priority spot. 

Karkera explains, “Many may find themselves in a situation where it is imperative to secure all three angles but may not have sufficient financial headroom to ensure adequate allocation towards all three products. For such a case, it is advisable to not try to prioritise one over the other, but in fact, allocate towards all three even if the allocated amounts are inadequate.” 

Allocating the product, however inadequate, experts say should serve as a good starting point and must come along with a commitment to shore up contributions as and when it is financially feasible.

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