Starting with mutual funds, stocks to debt instruments, gold and silver, commercial papers, etc., there are various types of investment instruments that investors can opt for. Investing your money somewhere means you expect your money to grow over time and meet the desired goal.
However, there have been instances where investors are seen buying insurance policies to meet their financial goals. It is so because sometimes people find it easy and convenient to just opt for one product. For instance, an insurance policy with investment elements in it that takes care of both insurance and investment.
Even though it might seem convenient, experts suggest, investment and insurance should not be mixed. Both investment and insurance serve different purposes for the investor. For instance, an insurance product is only meant to protect the policyholder and his/her family against unforeseen circumstances, whereas an investment instrument such as mutual funds, stocks helps the policyholder grow or create wealth to meet their goals.
According to experts, mixing the two – investment and insurance – can have adverse effects on the portfolio of an investor. For instance, if an investor mixes his/her insurance and investment needs, it could result in lower returns on his/her investments along with inadequate life insurance cover. Hence, doing so could defeat the main purpose of life insurance which is extremely necessary given the current times.
If the mix of insurance and investment is not dealt with, it could result in poor returns. The invested amount could fetch higher returns if invested in proper instruments.
Experts say, one thing investors should be clear about is – life insurance is not an investment option. No investment in an insurance product will fetch the investor propper returns on the amount invested. Hence, if you are planning to invest in a life insurance cover, opt for term insurance. They come at a lower premium with higher sum assured. Additionally, while choosing the sum insured, consider taking into account the economy and inflation.