Insurance is the process of transferring any kind of potential loss or threat to some agencies or companies who promises you to compensate for the loss when it happens. The agencies who shares your risk are the insurance agencies and in return you need to pay an amount to the company at some regular interval which is the premium. Thus the insurance companies give you protection from any kind of loss that can be speculated. Loss can be of two types. There may be financial loss in term of damage of assets like house, car, factory or human loss due to death. A person can get himself as well as is assets insured.
Most people think insurance is an expensive service to buy. Rather they prefer to invest this amount from which they well get high returns in future. But this is not true. It is a kind of investment only because by purchasing an insurance policy you are making your life secured as well as your most important assets. In other words by purchasing life insurance your are securing your future generations.
The reasons for thinking insurance as a good financial instrument are:
- The advantage of purchasing life insurance is that it is exempted from income tax. Various insurance plans also provide certain tax benefits both during entry and exit of the plan. The maturity amount is also non taxable.
- It covers the risks and uncertainties associated with a person’s life by ensuring us that in case of any odd events our family will not be affected much and they can maintain the same standard of life.
- In the long run insurance gives the policy owner a two way benefits of protection as well as wealth creation. After retirement life insurance provides you an assured income.
- People plan for long term investment in order to meet their future needs like education and marriage of their children, buying a car, or own house. Apart from giving financial support, insurance policies help you to meet these goals by offering you various maturity benefits like Money Back, Guaranteed Cash Values etc.
- Insurance is the safeguard to all your assets. The government also takes care of the fact that all the insurance agencies have enough capital to cover up your all liabilities in case of any loss without going insolvent.
- Some insurance types also offers you the chance to invest by paying an interest in the cash value. You can also change the premium amount in certain types of insurance.
So we see insurance policies help us to grow our future income without any risk. In investment there is some financial risk involved. You may not get higher returns in future and suffer losses. There is always a threat of going bankrupt. But for insurance though it is expensive but after you purchase you get both protection as well as chances to increase your income in future by enjoying tax benefits and others advantages as mentioned above. Insurance gives you the assurance that your hard earned money and assets can’t get away easily due to certain unanticipated bad incidents.
Why do people invest?
In order to make their future secured. At times of financial crisis they could withdraw the amount invested in various investments instruments and meet their needs during the hour of the crisis. People invest to save money for their children’s education, marriage and to bear the medical expenses during emergency. But these requirements of any income earner can also be fulfilled if he purchase an insurance as insurance serves all these purposes.. People need to break the misconception that insurance is an expense not an investment. By a paying a regular small sum as premium your are making your future safe and relieving your family from worries in your absence.