Insurance as investment 101

Insurance

Many of you might be thinking, why do we even talk about insurance in the investment channel.  We say the investment is for thriving when the economy is doing good, and insurance is for surviving during a bad economy. We can say insurance is a well-being fee.  Well, it’s the fee that means we should not commit more than we could offer. For every asset class, there will be corresponding insurance. If we think assets are objects, then insurance is the shadows of an object. When the object gets destroyed, shadows manifest into equivalent value assets. It may not be identical to a real thing.

This Story is from Indian mythology, and it happened that the Sun god wife Sangya was constantly disappointed with the expectation set by the Sun god Surya. She is not able to perform all the activities set out by the god. She wanted to attain greatness by meditation to get the power to meet the Sun god’s expectations. She seeks advice from her Father, Vishwakarma, regarding this matter. Her father advised her not to go for meditation because there will be no one to take care of her kids. However, She decides to clone herself with a magical chemical from her father’s lab.  Clone of Sangya called Chayya, Sangya ensures that Chayya takes care of her kids and performs all the activities set out by Sun god.  And Sun god un-aware of this matter, he was pleased with Chayya because she performed all the activities and also taken care of kids. He blesses Chayya with the kid.  When Sangya comes back to the kingdom, the Sun god will come to know about this matter and advices Sangya not to undo her clone. Now part of responsibility and value has been taken away from Sangya and given to Chayya.  So moral of the Story is don’t overdo anything beyond your limits. Since it is an investment, we say we should know what our financial limitations are.

As we told, there should be insurance for every asset class; let us see some of the insurance in the market and how we can use it for our well being

• Life term insurance
• Endowment insurance
• Health insurance
• Title insurance
• Vehicle insurance
• Transport insurance

Insurance is a powerful tool that protects your wealth during a crisis and helps us recover back to normalcy. However, it comes with a price tag too.  

Does it depend on each person as to how much they have to cover their assets in insurance? The answer is simple higher the asset value, the higher the insurance fee.

So we are not discouraging or suggesting that we should have lesser assets. No, that is not what we mean. If we aquiver the things that are more than our needs, the chance of getting into financial overhead is more.

Let me explain to you, for example, if Jone is earning 1000$ every month, And if he made a profit in the stock market trading worth 10,000 $, Jone decided to buy a car worth 40,000$, thinking he could make some more profits in trading like that. Now he has 30,000 as a loan, and he has to pay insurance of 1000$ every year. And EMI comes to 500$ every month for subsequent years. Jone beat again in the stock market, but he did not profit this time, but he lost 2000$. I think you already got what I am saying right. To cover the loss, he goes for a loan top up. After one year, due to high stress, he decided to sell off his car for 35000$. Well, it was not a good choice to buy things which are more than our needs.  Well, the insurance fee is just overhead if it is a wrong investment.

We are not even saying insurance is terrible. Insurance is essential for the things we care about the most. Like our health, parents’ health, protecting our kid’s future, and if we are the sole breadwinner than insuring our life just in case of unfortunate happens, it should not impact our family members.

In all the case insurance tries to protect insuree from the financial crisis. However, insurance will come with many preconditions based on the premium amount.  Some time would be better to go for comprehensive coverage. For example, if we go for standard health insurance, health insurance may not cover all diseases. What’s is the point of having health insurance.  Well, I have more examples if Joy has a personal loan worth 50000 and joy is the sole breadwinner in the family. Joy avoids buying term insurance. Well, it is a wrong choice. What if Joy kicks the bucket due to some unfortunate fact, and then family has to bear the personal loan. A good investor always focuses on wealth creation and wealth protection while keeping their famillies risk-free.

Many insurance companies offer insurance come returns on investment plans which may link with the stock market. We call it ULIP. Even though this kind of insurance looks very attractive, is it worth buying this kind of insurance? The answer is yes and no if you have minimal knowledge of investing your money and managing it. Then ULIP is for you. However, if you know how to invest your money? You can earn much better returns by investing and managing your money by yourself. For those who are not good at investment, some money in this kind of insurance may make sense. However, if you want to grow your money, you should learn how to invest your money better. Here at Mhuts.com, we are committed to providing the best investment content. So make sure you follow our social media so that you can make informed decisions on your investment.

If you are an employee, then most probably, health and life insurance will be given by your company. However, if you constantly keep changing your job, it is better to own your insurance by yourself. Also, make sure your insurance covers you, your family, and your dependents. For self and business people, it makes sense to have insurance owned privately. In some countries, the government would provide health and life insurance. Would you please check your country’s public website on this? Also, it will significantly help if you can leave the URL in the comments section. It would help the reader.

If you ask us what a reasonable premium we should pay for our insurance is, we recommend 1% of your annual income. However, it is not always possible to achieve this. We end up paying more than we think. It would be best if you took our advice with a pinch of salt. And do your due diligence before taking any insurance. The easy part is buying insurance, but the hard part is claiming the insurance when it gets mature because either nominee would have been unaware of the insurance. Or companies take time to check the well-being of their clients. Like many wise companies would a good deal of profits by unclaimed money. So we took a small initiative towards this issue. We create the tool which helps inform you and the nominee regarding your insurance. If you are interested, please check it out here.   

Or click on tools to find insurance reminder.