Why Life Insurance Is a Wise Investment?

By Sanjeev Jain

Let us first understand what exactly life insurance is! Life insurance is a kind of contract between an insurance policy holder and an insurer or insurance company, where the insurer promises to pay a designated beneficiary a sum of money upon the death of an insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. There are many types of life insurance, however, they may be classified in 3 main types: Term life insurance, whole life insurance and universal life insurance.

Now, let us examine whether life insurance is an investment? Though life insurance is designed to offer financial security against the policyholder's demise, it also works as a good investment plan. According to a few experts, life insurance returns are higher than equities



and bonds. Life insurance offers tax benefits, unlike mutual funds or fixed deposits, which are subject to capital gains tax.  Here are a few more reasons to consider life insurance as a wise investment:

Life insurance is a long-term investment. If you invest in the right policy, it will continue paying out benefits even after your death. This investment thus extends beyond your lifetime.

The returns are guaranteed. Unlike stocks or bonds where the investment could go down in losses, there is no risk of losing money in life insurance investment because you get what was promised. Life insurance is an investment in you or your family's future, but it also can have features that can help you set aside money now that you can utilize for future requirements.

Life insurance can be an investment for retirement. It is a wise investment choice for retirement planning as it carries low risk and has the potential to help secure you financially in your old age. Life insurance policies that come with a cash-value component allow for the cash-value account to grow over the years, which can then be used as a source of income in retirement years.

A life insurance policy can be a wise investment as it also provides security to your family or you expect large expenses later on.

About the author: Sanjeev Jain is a Senior Partner at Tata AIA Life Insurance.


Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the author. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you.