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Is Life Insurance an Investment?

The thumb rule to building wealth is to invest your money in avenues that offer generous returns. To do so, when you search for different investment plans and analyze their pros and cons, you may come across a life insurance policy also. You may wonder and ask yourself whether life insurance is an investment. So, here we are discussing the reasons you should consider life insurance as an investment avenue.

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Life Insurance an Investment – Reasons

Life insurance lessens the financial issues that your family may come across if an unfortunate event happens to you. However, this is not the only advantage that you get with a life insurance policy. You can select to invest your money in the stock market and may get high returns with a help of a potential Unit Linked Insurance Plan (ULIP). If you want, you can park your money in endowment plans and play it safe.

Here are some of the reasons why life insurance is an investment option:

  • You Get Risk Cover: Life insurance provides financial help in case of uncertainties in life. Your nominee gets assured benefits in case of an unwanted event in your life. This enables them to meet their life goals and living costs even when you are not around.

  • You Learn to Save: To keep your policy in force, you have to pay its premium regularly. This systematic and disciplined way of paying premiums inculcates a habit to save. Moreover, when you have to pay the premium of your life insurance plan, you tend to spend less because you want the amount of premium to be ready at the specified time. So, by prioritizing your expenditure and budgeting, you develop the habit of saving. In this way, you build a good amount of corpus over a period.

  • You Can Save Income Tax: The premiums you pay towards your life insurance policy enable you to save income tax. You get deductions under section 80C of the IT Act, 1961 against the premiums you paid towards your life insurance policy. If you add a health-based add-on cover to your life insurance policy, you get a deduction under section 80D. Moreover, the death benefits or maturity benefits that you get from a life insurance policy are also tax exempted under section 10D of the Income Tax Act.

  • Option to Switch Funds: A Unit Linked Insurance plan enables you to switch your funds around various asset classes. For example, you can shift your asset class to a debt fund to minimize losses. When the investment market recovers, you can switch to some other equity to grow your investment. Moreover, you can switch to a fund that is performing better.

  • A Good Way to Protect Your Money: Most life insurance plans guarantee to offer a sum assured. These plans keep your hard-earned money safe from any kind of market conditions. Moreover, many insurance providers offer bonuses also that help in building a corpus. In this way, the money you invest in a life insurance plan helps you meet your various life goals like higher education for your children, their marriage, etc. You can as well get a loan against the cash value of your policy in case of some financial emergency.

  • You Get Peace of Mind: Since wealth provides you the lifestyle you need and having corpus for future needs gives you peace of mind and life insurance gives you this. Life insurance assures you that the needs of your loved ones are met in every uncertainty of life.

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Summing It Up!

Life insurance provides many more benefits that are explained here. It provides financial protection to your family in case of any unfortunate event in your life. It even reduces the income tax that you have to pay. Moreover, as mentioned above, if you invest properly, it helps you build a corpus for your future requirements. Even though it is not a direct investment tool, it is an essential product that you must include in your investment portfolio.


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