Defeats the purpose
Insurance is all about safeguarding against unexpected events, while investments is all about growing your wealth. Mixing them will result in not doing justice to either of the two, separating them helps you manage risk effectively. It ensures that insurance stays focused on protecting your assets and loved ones, while investments aim for growth and returns.
Cost-effectiveness
Another compelling reason to avoid mixed products is cost-effectiveness. Insurance policies with investment components often come with higher fees and commissions. These additional costs can erode your potential returns over time. Separating insurance from investment allows you to choose more cost-effective insurance policies, which can free up more of your money for investments with lower fees.
Term Insurance is always a good idea
Term insurance is purest form of life insurance designed primarily for providing financial protection to your loved ones in case of your untimely demise. It offers a high death benefit at a lower cost, ensuring that your family is well-covered during the policy term.
Lack of Financial Literacy
Many individuals in India have limited exposure to financial education, and this can lead to misconceptions about the purpose of insurance. Insurance agents in an attempt to make sales, may sometimes push endowment or money back policies for life protection which results in under insurance of the individual.
We recommend purchasing different products for investments and insurance. For long-term growth and wealth creation, consider equity mutual funds, EPF (Employee Provident Fund), and certain savings schemes like Public Provident Fund and Sukanya Samriddhi Account. For pure insurance, opt for an optimal term insurance policy from a reputable insurance company. Separating these two aspects can help you achieve your financial goals more effectively.