The Most Authentic Guide on Personal Finance and Investments


Words of Wisdom : "Be careful about reading health books. Some fine day you’ll die of a misprint." ~ Markus Herz

Thou shall NOT BUY insurance...

...If your primary objective is investing your money
Insurance policies do not make a good investment. The returns are comparatively poor. There is very little flexibility to make changes, which may become necessary if your financial situation changes (which will surely keep happening). There is very little scope for diversification. So stick to term policies just to cover the risk to life and for investment opt for the pure investment products.

...If your primary objective is saving tax
As mentioned earlier, insurance policies are not a good product for investment. Therefore, avoid using them (except term policies) for tax saving purposes. There are better tax-saving products available. So keep away from insurance.

...If you propose to insure your child
Any unfortunate eventuality involving a child is no doubt emotionally very traumatic. But it usually does not hurt the family financially. Whereas, insurance cover is for mitigating the financial difficulty, that may arise with the death of the insured. Hence, taking a policy for a child is meaningless. It is an unnecessary expense, which should be avoided.

...If you are attracted by the advertisement hype
From their business perspective, the insurance companies and the agents may be more keen to sell saving-linked policies vis-a-vis the term policies, as the premiums and commissions are much higher. And hence the advertisements and promotions may speak more about such policies. Therefore, it is for you to keep your interests in mind and not be carried away by persuasive agents and publicity.

...If you a lone bird
Insurance is for the benefit of the dependents. Thus, if you are single with no one being financially dependent on you, it may not really be necessary for you to buy an insurance policy.

...If you are wealthy
You are person of abundant means. You have lots of wealth – properties, bank balances, investments, etc. In your absence, this may be more than sufficient for your dependents to continue living comfortably. A few lakhs of rupees from insurance company may not make any material difference to their future financial well-being. If such were the case, then you don't need any insurance.

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