14) “Life insurance involves protection as well as investment”. Do you agree with this statement? Give reason?

14) “Life insurance involves protection as well as investment”. Do you agree with this statement?
Give reason in support of your answer

14) “Life insurance involves protection as well as investment”. Do you agree with this statement? Give reason?
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11 Replies to “14) “Life insurance involves protection as well as investment”. Do you agree with this statement? Give reason?”

  1. No. I do not agree. Life insurance should serve a purpose of providing an income to others in the case of your death or leaving someone or some charity some money.

    An investment is making money. Life insurance is not an investment.

  2. befor that pl clarify what is 14)

    as long as the premium stands paid in due time, the protection is on. The money grows in secured investments, either with the government or safe industries. Atleast it will offset inflation. It is less than bank returns but the risk cover is a factor.

  3. No. It is only for covering risk factor.Cannot be an investment since it is not fetching much and become nothing when premium is not paid regularly.

  4. 1}Yes depends the product 2] Part of investment to compare with Bank interest for long time uncertainty.a] Participation policy in which product the bonus accumulating every year as well as sum assured also increasing simultaneously You can avail partly or fully with drawl in some co” product..b] ULIP is the product with market risk but having mostly switches/redirection facility/flexible for with draws and top up many option of increasing risk by paying increasing premium option.

  5. It’s not a matter of ‘agreeing or disagreeing’ with this statement because the statement is a distorted ‘truth’ designed to mislead potential clients about the true meaning of ‘life insurance.’

    First of all, there are basically 2 kinds of life insurance talked about in the insurance world today:
    1. Term Life, which is true insurance and the only kind you should get, and 2. Whole Life, which includes Universal Life, and which is NOT true insurance. It is also a real rip-off (the only people are served well by whole life insurance are the extremely wealthy who are looking for extra ways to shelter their money from taxes).

    The fact that the quote in your question uses the word “investment” makes me smell a Big Rat. It sounds suspiciously like a sales pitch made by sellers of Whole Life insurance who make more money by selling you whole life insurance rather than term insurance. Whole Life Insurance is NOT true ‘life insurance’ at all!

    Term Life Insurance IS true life insurance. It is pure insurance, and it’s the only kind of life insurance you should ever purchase. Term Life insurance–true insurance–NEVER involves “investment.” The true purpose of Life Insurance is to protect one’s loved ones, usually one’s spouse and dependent children, from catastrophic financial loss in the event of one’s untimely death. People purchase Term Life Insurance for fixed periods of time–say 20 years–at a relatively low cost. The cost is relatively low because the odds of a young person starting a family dying in the next 20 years is very low.

    Whole life insurance, on the other hand, which charges you premiums for the rest of your life, lures people in by adding the extra dimension of “investment” to it. But that doesn’t mean it’s a GOOD investment. The premiums for Whole Life Insurance are very, very high. You pay the insurance company these very high premiums so that they, in turn, can invest the money from your high premiusm elsewhere make more profit for themselves. Ie., you are essentially giving these insurance companies a low interest loan. That serves these companies well financially, but it doesn’t serve YOU well financially–it’s doing this at your expense. You’d be better off not paying all those high premiums and money yourself.

    HOW BIZARRE that the quote makes it sound like “investment” is the primary purpose of life insurance and “protection” comes in second to that. The writer makes ‘protection’ sound almost like an afterthought. Truth is that the real purpose of “life” “insurance” is just that–to “insure” one’s “life”–so that your loved ones will be PROTECTED by the compensation they receive should your life end unexpectedly! That’s what life insurance is all about!!

    Whoever wrote the quote you cited (and I’m sure he’s an insurance salesman)? I wouldn’t trust the guy further than I could throw him. This guy knows he’s deceiving clients who trust him by painting a false picture of ‘life insurance.’ Sadly, a lot of people will fall for it.

  6. First of all, this question was asked from India, where the society is generally more cognizant of appropriate applications for life insurance beyond a simple death benefit. The US tax code instituted rules designed to provide incentive for insuring the lives of heads of households. Those rules, when applied correctly, can also offer tremendous advantages in the area of investment. Don’t let anyone tell you that this is an inappropriate use for life insurance. There’s a myriad of reasons that the smartest, wealthiest people on the planet do it.

    Of course, this issue is really limited to the topic of permanent insurance. There are actually two facets to this question: Is there a legitimate purpose for permanent life insurance; and how do such products properly fit into an investment strategy?

    Primarily, life insurance is designed to replace income for dependents for a time period that those dependents are unable to adequately provide for themselves. If one is responsible for the livelihood of no one who cannot provide for themselves, one doesn’t need life insurance; unless…

    One wishes to leave an inheritance and has not adequately planned for it.

    One has a permanent policy in place, and it may be more advantageous to exercise options other than surrendering or lapsing it.

    One has maximized contributions to one’s tax qualified retirement plans and needs another vehicle for tax deferral.

    One is planning for estate taxes.

    One is in need of a creditor-protected asset vehicle.

    One has assets that one would like to pass on tax-free and bypassing probate.

    Any one of the many other scenarios where life insurance can do what no other vehicle can.

    Also, term is not appropriate if one’s life insurance need exceeds 20 years. With a reasonably performing participating whole life policy, one can insure himself for his entire life for less than the total premium outlay of a 30-year term.

    I won’t get into a discussion of insurance-based investment options. There are far too many angles to discuss; and from what I’ve read here so far, it’s a concept far beyond the comprehension level of this forum. It’s obvious that you asked your question as part of an academic assignment. Research proper sources about various forms of insurance, discussing such issues as taxation, internal investments, and dividends. For the rest reading this, find a properly qualified financial planner or advisor who offers life insurance only as part of a comprehensive financial plan. That doesn’t include most insurance agents; and it definitely doesn’t include Suze Orman or Dave Ramsey, two of the biggest dealers of misinformation in the financial world.

  7. Most insurance policies give a return of about 5-6 %. This hardly beats REAL INFLATION.

    Go for PURE TERM PLAN.

    Invest the premium saved in better avenues like PPF / SIP IN MUTUAL FUNDS / DIRECT EQUITY

    Insurance is an expense , not an avenue for investment.

    No insurance policy will make you richer than what you are today ( even on maturity)

    If your nominee gets the money , he is the biggest loser. He or she will be better off financially , if you stay alive and continue to earn well. Insurance money at the most will only give temporary financial relief. to your nominee.

  8. No, insurance and investment are 2 separate objectives and must be managed separately.
    Mixing them up leads to failure of both the objectives.

    For example, if I take a money back policy with an annual premium of 25k, the sum assured is in the range of 5-10 lacs. This much amount earned over 20 years hardly provides a decent insurance cover and neither does it provide any substantial returns from an investment stand point.

    Ideal would be to look at investments that provide a substantial return in either case.
    If one pays an annual premium of 25k-30k on a term insurance, the cover available ranges from ~50 lacs(LIC) to 1.5 crores(HDFC or ICICI). This much amount can to a very large extent provide financial security to your family.

    At the same time, money invested in SIPs in mutual funds can earn substantial returns over a longer period.

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