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Insurance and Investments

This is a term normally reminded by the Insurance Agents just before the tax declaration time for many of the people. But come to think of it, even I have done pretty much the same. I have normally ended up investing in ULIP's thinking of returns rather than insurance per se. Looking back today, I dont think that I am covered enough.
So whats the best way to cover one self from Insurance perspective.

Well, lets keep things simple and understand a couple of basic points.

  1. Insurance is meant for keeping a backup incase of any eventuality that happens to you and you dont want your dependent's to suffer
  2. Investment's are meant to create more financial stability for you and your family  so that down the years you can enjoy, especially with the rising cost and for the years you stop earning, or for planning for expenses down the road(House,children's weddings, Children's education)

With time , we have seen that both of these were sold together as a single plan. Either as ULIP's or equivalent one's. At the same time I dont completely blame the insurance companies. As that was the time markets were booming and people could see some stable income coming in and also get some insurance and finally and most importantly SAVE TAX.

Today, all I would say is, for Insurance, buy a simple Term Plan. Cover your self, say 7-10 times your current annual income. There are a lot of companies giving insurance at a very low cost. It is indeed cheap.

For Investment, divide your investment into FD's Mutual Funds, Stocks, Bonds etc. Don't invest in one type of instrument. Most important, keep discipline while investing. Do it every month fixed amount. Use SIP's(Systematic Investment Plans) wherever applicable. Thats the best way to do it. 
Dont make investment complicated. Invest what you can and that doesnt mean spend everything and say you dont have any money left. Keep some target every month. And If possible increase that over a period of time.You will be surprised the amount you will accumulate at the end of an year.

Keep Investing and creating wealth.


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