Investment or term insurance – Which is the best option?

Naval GoelPolicyX.comA well-designed financial plan to see you through life’s difficult times should be your utmost priority in the modern day. Right execution of a financial plan can help you to achieve your dream of financial freedom. You may be aware of this fact but you may be stuck at deciding which is better – investment or insurance. Investment and insurance are two different things. To help you select what suits you best, we have drawn out a comparison and have given suggestions. Read on. Investment is regular contribution, monthly or yearly, which helps you in achieving your ultimate financial goals. On the other hand, insurance is a way to secure yourself and your loved ones by paying an amount of premium.You enjoy the return on the investment whereas under term life insurance the sum insured will go to your nominee.You will be considered as a smart investor when you plan the duration and amount which can take you closer to your financial goals by regular investment whereas you will be considered as a smart insurance buyer when you plan the amount which would be sufficient to cover the economic loss caused to your family.Each investment comes with different duration and risks. On the contrary, when you opt for term insurance, you pay a small premium and get the maximum coverage as death benefits. But, in the occasion of you surviving the policy duration, you don’t get anything.It is wiser to plan tax with investments. You can make an investment in ELSS, PPF, and others and also get tax benefits while on the other hand it is not advisable that you shape your tax plan as per your insurance need. Paying 60 – 70 thousand rupees as premium to reap the tax benefits of Sec 80 C is simply pointless.On the basis of your financial stability, you can consider investing in multiple options like fixed deposits, real estate, gold, NSC, etc whereas it is certainly not the smartest of move to invest in different kind of insurance policies like money back, endowment plans, ULIP, etc., at the same time as that will only add an additional burden on you.To derive different risk-returns combinations, one has to choose from a wide array of investment products. When it comes to term insurance, you can get high sum assured by paying a fixed premium throughout your life time. Of course, endowment plans and ULIPs are a different ball game.Investment done must be tracked on a regular basis. There are no such worries associated with insurance as long as you keep paying your premium on time. But I am yet to answer the question – term insurance or investmentGiven the low returns offered on traditional insurance products, it makes sense to buy a term life insurance policy to ensure that your financial goals are achieved even if you are not around. Investments are definitely important. If you start investing earlier in life, you would definitely gain an upper hand in comparison to one who starts later, even though the latter ones invest more. The preferred way for an average individuals would be to go for both insurance and investment as the former one is the parachute and the latter one is a safety net. It won’t make sense to go for only insurance and then outlive it because in such a scenario you may survive retirement, but you will find very little savings that will see you through retirement. It also doesn’t make sense to plan only for investments because in case you don’t live your working life, your family will surely suffer. Hence, ideally you should go for both. The only complication in choosing this way is that you will have to set aside enough money for both. However, it is not impossible if done through careful planning.