Is Insurance an Investment Option? Reader’s Viewpoint

For me Insurance is never an Investment Opportunity and many agrees to it as well but few had different views. So let me share that different views here.

Note : I waited for Sachin to write something about Insurance as an investment option and enlighten us but as I did not see anything from him so finally though to put his comments into a post and share it here.

• sachin says:

  Dear Shabbir,

  I read your article about Insurance. Like many people in the market,you have also mentioned insurance as a bad investment option.

  I wonder why people like you say so. Rememebr one thing, people who design endowment produts ( traditional insurance plan) and Insurance companies who promote such products- including govet ownerd LIC- are not fools to design such products and market the same for the public. Those people are experts ( Insurance acturies of insurance companies and IRDA) in this field and obiviously have more insurance knowledge than a lay man like you. If only term insurance is good enough to take care all insurance needs(and all other products are not worth) then why the hell insurance companies spend so much time and effort to design and there after market such products in the market? Why does IRDA experts and acturies approved such products?

  Shabbir, this may be your view but that does not mean those produts are not worth to take. Let me ask you, can just a term insurance is suffice to serve all the purpose of insurance? The answer is “NO”.

  Term insurance is only for insuring self. Insurance has many role to play in an individual’s life. Insurance is taken not only for just to cover the risk of a bread winner but also for ensuring disciplined savings for child’s education, marriage etc as well.

  I request you to learn more about insurance or atleast take some useful courses in this field before going to write any artilce like this. Otherwise many of your readers will get misleaded with your in appropriate statements.

  Good luck

  Sachin

  • Shabbir Bhimani says:

    Sachin, Its great to see conflicting views but remember the experts (as you term them) are not paid because they have a great product for customer but are paid if they have a great product for the company.

    Regarding Insurance let me ask you one question. Why on earth we are forced to do insurance. ELSS funds is out of Tax saving from DTC and now you can only save tax to the extent possible with Insurance. If it is that greater a product to serve your needs it should not be forced on to people.

    Again I do not say that I am best person to comment on this but I am the right customer who has the right not to be fooled by this marketing gimmicks. Yes I am an equity investor but do you think that means I can be ripped off but these so called experts.

    Term insurance is for insuring self and that way you insure yourself and for your other benefits you can invest at other places where you see more returns. Am I wrong in stating that?

    Let me know your thoughts

• Sachin says:

  Shabbir,

  I think you are comparing apple with orange. You cannot say one is good or another is bad because Apple is an Apple not an orange. How can you compare ELSS with Insurance? Though both have an option to save tax. Remember, purpose of insurance is not to save income tax. Remember that. I think you think like a lay man. When you write an article about a financial product, you need to think like a knowledgeable person. Why I am saying this becuase many people think that insurance is meant for tax saving and they give more imprortance to that rather than looking for a protection.

  Shabbir, you said produts sold by insurance companies are good for companies not for customers. You are wrong! If that is the case, millions of people would not have taken endowment policies in India. It look like your are biased with mutual fund investment. Mutual fund is a great tool for investment. I do regular investments there. In fact, I am an AMFI member too. But how can you compare Insurance with Mutual fund. Both are different. It is like you are comparing two different things meant for different purposes.

  Understand the difference between these two. I do have ELSS investment as well but I have doen that with certain objective in my mind. ( My financial goal) I do have endowment plan as well but I have a different objective for that. I do not believe endowment plans or any insurance plans are doing good only to insurnace companies. You are saying this out of your ignorance. This is not my opinion but that is the fact. I would like to know your credentials in MF and Insurance firt. Have you ever worked as financial planner suggesting Mutual funds or other investment products? I think your knoweledge in this area is limited to the extend as a customer not as a professional expert in this area. Remember, a customer may have a different views about different produts but that may not be always right becuase customers knowledge is limited to his experience with that product. This is where Certified Financial Planner prefessionals play a role in guiding customers to safe guard their future and investment goal.

  I hope you have understood I explained above. If your knowledge is limited as a customer, then it is not ideal for you to advice people like this. If you really keen on advicing people like this then take up some international certification or any professional certifications along with some practical experience in financial planning and advisory.

  Best of luck

  sachin

  • Shabbir Bhimani says:

    I am not comparing Insurance as a medium to save tax but that is main reason majority of Indians invest in insurance.

    I am again not comparing insurance with mutual funds. I am comparing the return on insurance with the return on insurance investment. I hope you know both are different.

    If you have option of being insured and also get higher return by combining term insurance and mutual funds why on earth should you go with Insurance as a stand alone product and pay such a hectic price of 20%.

    Again as a customer I suggests practical things which is near to real people and I don’t want to ruin myself like you by taking those paper which you term as certifications.

    I never claimed to be a financial expert and I share thoughts my own way. Check out my disclaimer as well. Did I say I am a financial expert and planner?

• Sachin says:

  Shabbir,

  You said both! Let me copy your statement as it is written!

  “I am again not comparing insurance with mutual funds. I am comparing the return on insurance with the return on insurance investment” ( You are actually comparing here!!!)

  Why you are comparing the returns of both? Can You compare debt and equity? Just becuase equity perform many folds more than debt can any one say debt is a useless one? Traditional insurance is more secured and it is not meant for investment. Insurance is for protection. You said you are not comparing both but you have done exactly the same by comparing the returns of both!!! Remeber I said, not to compare Apple with an Orange!

  As you said, if any customer takes insurance policy only for an investment purpose ( i mean with the intention of making wealth) or only for a tax purpose then that is wrong and I can only say that such thing happen only becuase of the ignorance of that customer. So if you are in a doubt, consult a qualified ( practically as an investor and academically) fiancial planner. I do nto understand why you try to become a Munnabhai type Financial expert? I understand your experience as a real time investor but that is not complete enough to advice people. That was I was trying to tell you.

  Your suggestion : Combining term insurance with MF is a good combination but it is widely known investment practice and people know about it from news papers and other sources already.

  Let me teach you other purpose of insurance. Insurance is very much needed to create risk free child education fund. Only MF SIP is not suffice to meet that challenge. One need to have a child policy seperatly along with a good SIP fund inorder to create a risk free child education fund.

  Insurance is having an option where in case the payor is no more -due to sudden death or permannat disability-during the term of a child policy- the company is liable to waive all future premiums and take care the education fund for the whole period as if the premiums are paid in time. MF is good for wealth creation but do not offer this type of contigency services. So one need to have perfect combination of both.

  Cheers

  Sachin

  • Shabbir Bhimani says:

    According to me debt is useless if it cannot perform as good as equity based investment and I am not trying to become a Munnabhai financial expert or in fact I am not trying to be a financial expert any way. I am fine with what I am.

    Now about the Child eduction which I see that you are trying to emphasize all the time is nothing but you estimate the cost of it after few years and invest accordingly to get that amount roughly.

    You can manage that using your own way of investing and you do not need to be paying such high fees.

    If you want paying those people such fees I am sure no one can stop you from that.

• Sachin says:

  Shabbir,

  Debt may be useless to you but many people find it is very usefull atleast during market down turn which happened two years ago where debt instrument safeguarded capital erosion and offered many times more returns than equity. I think you are biased. I have no issue and it is up to you. The only issue is: WHY You try to impose your ideas ( acting as if you are financail expert by writing about it)to others. Internet is an open book. Many people write many things. I told you in the beginning, when you are not sure about what you are writiing then change your subject. If you think you are not an

  expert financial analyst and not knowing much about debt, insurance and other financial produtcts then don’t write about it. Write about some thing which you know and you are confident about. If you think, debt is a useless one, then keep that thing with you why try to write just about one side. That is why I called MUNNABHAI finaical expert!!!

  Internet is an open forum. Any one can come here and read. Some time people visit your site while searching GOOGLE. I intention is to keep readers away from misguiding facts mentioned in your article. YOU ONLY ADMITTED YOU ARE NOT AN EXPERT IN INSURNACE OR FINANCIAL SIDE. THEN, WHY YOU TRY TO CONVEY YOU HALF BAKED KNOWlEDGE TO YOUR READERS AND SPOIL THEIR STOMACH Shabbir?

  READ MY COMMENT COMPLETELY BEFORE REPLYING.. READ MY PREVIOUS COMMENT ONCE AGAIN. I CLEALY EXPLAINED WHY I MENTIONED ABOUT CHILD EUCATION FUND. READ FULLY AND BE PATIENT Shabbir. “Now about the Child eduction which I see that you are trying to emphasize all the time is nothing but you estimate the cost of it after few years and invest accordingly to get that amount roughly.” You would not have written this sentence if you have read my previous comment.IT lok like you did not understand what I mentioned. Read again….!

  Sachin.

  • Shabbir Bhimani says:

    Sachin, Again I am biased and if you think that debt protected 2 years back to people then I agree with you but now debt is the only thing which is killing. So there are 2 sides of every coin.

    You are saying internet is open book and so I am fine with my idea that Insurance is useless and you are fine with your idea that insurance is few among the best investment option. I told my views and you have your own view.

    Now I am not a financial expert does not mean I have no way to convey what I think is right and if you think you are the only person who is right and should convey things do start your own blog and do it. Did anyone stopped you in doing it. If you want to post something on my blog I am open to guest post as well. In fact I have plans to put this conversation in a post and let readers read it. I have nothing against you or any financial expert like you.

    Again I am not trying to spoil anybody and I guess you are just the one who has this kind of views.

    I do read all and is considerably good in understanding the English.

• Sachin says:

  Shabbir,

  To give a financial services advice, one need to be qualified to do so. In US, unless a person do not have a requisite certification, he/ she is forbidden too give advice to public by any means. In india too, things are changing and soon there will be a strong regulation in this area and people who are not properly certified will be forbidden from giving advices- Online or offline.

  Debt is good just to protect your savings. Equity for growth. So Use them appropriatly and get advantage of both. Challo, I am saying the same thing which I explained earlier becuase you do not have mind to understand the same.

  • Shabbir Bhimani says:

    Sachin, I am not sure if you are from US or UK but my disclaimer clearly says what I am and who I am. Now you mean to say US people are not allowed to blog about things without a certification? Haah. Check out my blog http://imtips.co and I have so many friends and people in US who are financial expert in online niche and they hardly have any eduction to back that up. It looks like you are mainly a bookish guy.

    Now let us not deviate from the original context and as I told you why don’t you write a post explaining the benefits of Insurance and I will be more than happy to publish as guest post in your name.

    I am anyway compiling this conversation into a post and will go online soon.

Finally Had to ask this.

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