Insurance and investment have become an essential element of one's life in today's world. While it's a wise decision to set aside a portion of your current earnings to save for your and your family's future, many people confuse insurance and investment as the same thing, while it’s not. Here you will get to know the advantages and disadvantages of insurance policy.
Insurance Vs Investment?
Insurance is a service that one purchases with the intention of guarding a person or family against some form of loss. This loss can be in the form of loss of life, property, or health. However, In case of Investment, it is the amount of money or assets that you give to a third party in exchange for the return of that money or assets along with profit at an agreed point in the future.
We are majorly going to discuss insurance policies and its advantages and disadvantages. Knowing both the aspects will give you a clear idea about how you can use insurance policies to your benefit.
Advantages of Insurance policies
Below are some advantages of insurance policies -
Perfect coverage for your family after you are gone : Nobody knows what will happen next since it is impossible to foretell the future. Your primary concern may be to protect your family from an unexpected potential risk. An insurance policy can render a helping hand when you are unable to support your family or after your death.
Compensation benefit : Insurance compensates the financial loss produced by the hazard. If the unfortunate catastrophe occurs before the end of the term, you may easily recover the financial loss covered by the insurance. It alleviates a lot of your emotional tension and discomfort produced by the peril. In the case of life insurance, your family is financially protected in the event of your death.
Tax Benefits : Regardless of the insurance policy you purchase, you can claim tax benefits of up to 1.5 lakhs under Section 80C of the Income Tax Act of 1961.
Financial support after retirement : There are particular insurance plans designed to help you once you retire. It keeps you financially healthy once you are no longer able to work in your old age. Furthermore, purchasing insurance at a young age saves money in the long term.
For specific reasons: Unlike other financial tools, insurance is designed to achieve certain purposes. This helps you utilise the funds for the purpose you had initially opted for.
For efficient business operations: Even if you suffer an unexpected loss in your business, insurance can assist you in managing the loss. An insurance policy purchased for your employee serves as a motivator at the job and aids in the smooth running of the firm.
Maintains standard of living : insurance provides financial protection against an unexpected risk of losses due to which people can maintain their living standards. The insurance company provides a safeguard in terms of money to avoid the unfortunate financial crisis.
Eliminates dependency : due to death or destruction of properties, the family suffers from unbearable and non-compensational table losses. The insurance protects against those unbearable losses. The life insurance policy gives full financial support to the dependent in case of the death of the insured applicant which in turn eliminates the dependency.
Disadvantages of Insurance Policies
Tricky terms and conditions: When purchasing an insurance policy, some of the terms and conditions may be so complicated that you may not receive full recompense for your losses. It is critical to read the terms and conditions before purchasing.
Extensive legal formalities: Even if you choose a suitable plan, claiming the insurance money may take a long time owing to the company's lengthy legal procedures.
Potential crime occurrences: Life insurance plans may result in potential crime episodes because policy recipients may be enticed to use illegal means to receive the covered sum.
While every financial instrument will have both advantages and disadvantages, it is recommended to choose wisely based on your need and purpose. You can benefit from an insurance policy provided if the goals are clearly realised
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