There are two types of financial goals in life: insurance and investment goals. Some goals can be better achieved through insurance. All sensible goals in life fall into this category. The risk of dying prematurely, leaving behind dependents with little or no stable income is one such risk. The risk of becoming physically or mentally incapable leading to loss of earning capacity is another risk that can affect a family’s standard of living, children’s education and marriage and more.
These financial risks can be managed through various life insurance/annuity products. A judicious combination of term insurance, endowment/whole life insurance and annuity contracts can meet life’s most delicate goals.
Investment goals, on the other hand, can vary from individual to individual. It could be buying a luxury house in a prime location or buying a high-end car or going on vacation abroad. There is nothing wrong with dreaming big. People have started to believe that by investing in fields that promise high returns, it is possible to achieve certain dreams of life. They are ready to take risks for the possibility of obtaining high returns.
Insurance objectives
The problems start when trying to achieve even insurance goals with the help of investment products. When the goal is to achieve insurance goals, an individual cannot afford to take risks. If one wishes to achieve investment goals with the help of insurance products, he will not succeed because insurance goals can never be compromised.
Although there is a common perception that a life insurance contract is profitable only in the event of death, it is the result of an inappropriate positioning of life insurance in the financial market by the insurers. To better understand the public of insurers, we can say that no one makes a windfall in the event of death. Life insurance is a mechanism for arranging the replacement of lost income.
It is designed to give the family a sum of money that allows them to meet the insurance goals of the deceased insured. Again, if the insured is alive on the maturity date, they have suffered no loss. On the one hand, it has collected the sum assured in a lump sum or in installments with a bonus which is quite decent. Secondly, he benefited from the risk cover for a long period of time, which must have given him reasonable peace of mind.
The insurance public must understand the value of this peace that only life insurance products can bring to the world. In India, insurance objectives are sometimes undermined and disproportionate importance is given to investment objectives. We must value achieving insurance goals if we are to live and work in peace and dignity.
The author is an insurance industry analyst
