1. ARE YOU SURE YOUR INVESTMENT IS SAFE & SECURE
DEAR FRIEND
I AM SURE YOU ARE INVESTING ATLEAST 20 % OF YOUR INCOME AT ONE OR OTHER
PLACE IN SUCH SCHEME WHICH YOU FEAL GOOD. BUT ARE YOU SURE THAT YOUR
DECISION TO INVEST IN THAT PARTICULAR PLACE IS CORRECT & ARE YOU GETTING
GOOD RETURN & IT WILL HELP YOU & YOUR FAMILY IN FUTURE.
AS PER PRESENT TREND MOST OF THE PEOPLE ARE INVESTING IN SHARE MARKET
OR MUTUAL FUND WITH THE INTENSION TO GET GOOD RETURN IN SHORT PERIOD
PLEASE LET ME EXPLAIN SOME FACTS ABOUT INVESTMENT:
ANY WELL DESIGNED PERSONAL FINANCIAL PLAN SHOULD INCLUDE LIFE
INSURANCE, SAVINGS AND INVESTMENTS. SOMETIMES THE LINES THAT SEPARATE
THESE THREE DISTINCT FINANCIAL PRODUCTS GET BLURRED, BECAUSE CERTAIN
TYPES OF LIFE INSURANCE INCLUDE SAVING AND INVESTING COMPONENTS. WHEN IT
COMES TO PLANNING YOUR BUDGET, EXAMINE ALL THREE OF THESE CATEGORIES
SEPARATELY FOR BEST RESULTS.
IDENTIFICATION
SAVINGS IS MONEY THAT YOU SET ASIDE FOR EMERGENCIES OR FOR BIG TICKET
ITEMS. THESE FUNDS SHOULD BE KEPT IN A SAFE ACCOUNT THAT IS READILY
ACCESSIBLE, SUCH AS A BANK SAVINGS OR MONEY MARKET ACCOUNT.
INVESTMENTS INVOLVE RISK, BUT ARE ALSO EXPECTED TO PRODUCE A HIGHER
RATE OF RETURN THAN SAVINGS. INVESTMENTS MAY INCLUDE STOCKS, MUTUAL
FUNDS AND REAL ESTATE. LIFE INSURANCE IS A POLICY THAT PROMISES TO
PROVIDE A MONETARY SETTLEMENT TO HELP PROVIDE FOR YOUR LOVED ONES IN
THE EVENT OF YOUR DEATH.
WHY IS LIFE INSURANCE SO IMPORTANT?
LIFE INSURANCE IS USUALLY TAKEN BY THE EARNING MEMBER(S) OF THE FAMILY TO
ENSURE THAT IN CASE OF THEIR DEATH, AND HENCE THEIR SOURCE OF INCOME
CEASING TO EXIST, THE DEPENDENT FAMILY MEMBERS WOULD HAVE A LUMP-SUM
AMOUNT TO FALL BACK ON. SO BY PAYING A SMALL AMOUNT EVERY YEAR THE
EARNING MEMBER OF THE FAMILY CAN ENSURE THAT THE FUTURE OF THEIR LOVED
ONES IS ABSOLUTELY SECURE FROM A FINANCIAL POINT OF VIEW. SO IN THE EVENT
OF DEATH OF AN INSURED PERSON, THE NOMINEE OF THE POLICY WOULD RECEIVE
AN AMOUNT CALLED THE SUM ASSURED WHICH CAN THEN BE USED EFFECTIVELY TO
PLAN FOR THEIR FUTURE.
LIFE INSURANCE IS ABSOLUTELY CRITICAL FOR EVERYONE IRRESPECTIVE OF THE
AMOUNT OF INCOME YOU CURRENTLY EARN, UNLESS YOU HAVE SAVED ENOUGH TO
ENSURE THAT YOUR FAMILY CAN COMFORTABLY LIVE WITH THE SAVINGS ALONE €“
NOT EVERYONE CAN MANAGE TO DO THIS EVEN WITH HIGH SALARY AND INCOME

2. LEVELS. IMAGINE LIVING IN A GREAT HOUSE YOU HAVE TAKEN ON LOAN AND YOUR
FAMILY NOT BEING ABLE TO LIVE IN IT, JUST BECAUSE THEY DO NOT HAVE THE
INCOME TO KEEP PAYING THE MONTHLY EMIS OF THE HOME LOAN!
DIRECT BENEFITS OF TAKING A LIFE INSURANCE PLAN
PROVIDES FOR LOSS OF INCOME - IN CASE OF THE POLICY HOLDER’S DEATH, THE
DEPENDENTS WILL SUDDENLY BE LEFT WITHOUT A CONSTANT SOURCE OF INCOME.
THE FUTURE REQUIREMENTS OF THE DEPENDENT MEMBERS TOO WOULD BE
HUGELY COMPROMISED WITH THEM HAVING TO SETTLE FOR OPTIONS WHICH ARE
NOT AS GOOD AS YOU WOULD HAVE WANTED IF YOU WERE AROUND. WITH A GOOD
AMOUNT OF LIFE INSURANCE COVER YOU CAN ENSURE THAT YOUR FAMILY IS NOT
LEFT HIGH AND DRY ALONG WITH EMOTIONAL TRAUMA OF YOUR ABSENCE. IT IS ONE
OF THE MOST IMPORTANT REASONS FOR TAKING A LIFE INSURANCE POLICY.
PROTECTS YOUR ASSETS - IN YOUR ABSENCE, YOUR FAMILY SHOULD NOT HAVE TO
RESORT TO SELLING THE ASSETS WHICH YOU ACCUMULATED WITH YOUR HARD
WORK. IN THE EVENT THAT THERE IS NO SOURCE OF INCOME YOUR FAMILY WOULD
HAVE TO SELL ASSETS LIKE LAND, HOME, VEHICLE, JEWELLERY WHICH YOU HAD SO
LOVINGLY PURCHASED. THE COMFORTS YOU WANTED TO PROVIDE TO YOUR FAMILY
SHOULD NOT BE TAKEN AWAY FROM THEM TO MAKE DO FOR THEIR DAY-TO-DAY
LIVING. IN CASE YOU ARE ADEQUATELY ENSURED, ALL YOUR LOANS AND YOUR
FAMILY’S FINANCIAL FUTURE WOULD BE WELL TAKEN CARE OF.
FINANCIAL PLANNING - LIFE INSURANCE POLICIES CAN ALSO BE TAKEN FOR SOUND
FINANCIAL PLANNING DEPENDING ON YOUR REQUIREMENTS AND RISK APPETITE.
FOR THE CONSERVATIVE INVESTORS THERE ARE A HOST OF TRADITIONAL POLICIES
LIKE MONEY BACK INSURANCE POLICIES AND ENDOWMENT PLANS TO PROVIDE
INCOME TO YOU AT REGULAR INTERVALS OF TIME. THE MORE MARKET FRIENDLY
INVESTORS CAN CHOOSE ULIPS (UNIT LINKED INSURANCE PLANS) TO PLAN THEIR
FUTURE. THERE IS A HIGHER ELEMENT OF RISK INVOLVED WITH ULIPS BUT THE
GAINS TOO CAN POTENTIALLY BE ON THE HIGHER SIDE. IDEALLY EACH INDIVIDUAL
SHOULD ASSESS THEIR REQUIREMENTS AND CHOOSE THEIR INVESTMENT OPTIONS
AND TIME HORIZON.
TAX SAVINGS - ONE OF THE KEY REASONS, PEOPLE BUY LIFE INSURANCE IS TO
AVAIL TAX BENEFITS UNDER SECTION 80C UP TO THE LIMIT OF RS. 1,00,000
ANNUALLY. MONEY PAID AS PREMIUM OF LIFE INSURANCE POLICIES IS EXEMPTED
FROM INCOME TAX AND THE PROCEEDS FROM A LIFE INSURANCE POLICY ON
MATURITY ALSO GET TAX EXEMPTION UNDER SECTION 10(10D) OF THE INCOME TAX.
LIFE INSURANCE IS QUITE AN IMPORTANT ASPECT OF ONE’S FINANCIAL PLANNING. IT
IS CRITICAL TO KNOW ALL YOU CAN ABOUT LIFE INSURANCE BEFORE PURCHASING
THE POLICY. CHECK OUT WITH US WHICH MAY BE USEFUL TO YOU
ALL OF US ARE WORRIED ABOUT OUR INCOME WHEN WE RETIRE. FOR A TROUBLE-
FREE RETIREMENT LIFE. INVEST SMALL AMOUNTS TODAY WHILE YOU ARE EARNING
AND RECEIVE FIXED ANNUAL PAYOUTS DURING YOUR RETIREMENT YEARS. IT IS

3. BEST TO START PLANNING FOR YOUR RETIREMENT AS EARLY AS POSSIBLE
BECAUSE THESE SMALL AMOUNTS CONTRIBUTED TODAY WILL BECOME A LARGE
SUM OF MONEY OVER THE YEARS.
PLANS ARE FLEXIBLE AND CAN BE USED EFFECTIVELY IF PLANNED OUT WELL. ON
ATTAINING THE RETIREMENT AGE, THE POLICY HOLDER CAN WITHDRAW 33% OF THE
MATURITY AMOUNT FOR SOME IMMEDIATE FINANCIAL NEEDS. THE BALANCE AMOUNT
IS USED TO PURCHASE AN ANNUITY WHICH GIVES A REGULAR MONTHLY/ANNUAL
INCOME.
LIFE INSURANCE IS THE COMPENSATION PAID TO YOUR FAMILY FOR THE FINANCIAL
LOSS DUE TO YOUR DEATH. IT DOES NOT ACCOUNT FOR THE EMOTIONAL LOSS,
THOUGH. SO, IF YOU ARE WONDERING WHY YOU SHOULD BUY LIFE INSURANCE,
JUST NOTE THAT LIFE INSURANCE CAN OFFER PEACE OF MIND EVEN ENSURING
THAT YOUR DEBTS WILL NOT BURDEN YOUR LOVED ONES IN CASE OF YOUR
UNTIMELY DEATH. THUS, SIMPLY, ANYONE WHOSE DEATH WOULD LEAVE HIS FAMILY
IN A FINANCIAL DISTRESS NEEDS INSURANCE!
NOW, DIFFERENT PEOPLE HAVE DIFFERENT REQUIREMENTS, WHICH CHANGES OVER
THE VARIOUS STAGES OF LIFE. LET US CONSIDER THE VARIOUS STAGES IN AN
INDIVIDUAL’S LIFE:
THE THUMB RULE IS ONCE YOU BECOME A PARENT, THE INCOME GENERATING
ADULT IN YOUR HOUSE SHOULD HAVE LIFE INSURANCE COVERAGE THAT WILL LAST
UNTIL YOUR YOUNGEST CHILD COMPLETES COLLEGE AND STARTS GENERATING AN
INDEPENDENT INCOME. IF YOU HAVE LARGE FINANCIAL OBLIGATIONS SUCH AS HIGH
CREDIT-CARD DEBT OR A MORTGAGE, YOU COULD USE LIFE INSURANCE TO ENSURE
THAT DEBT IS COVERED. ALSO, SINCE LIFE INSURANCE IS A VERY EFFECTIVE
INSTRUMENT FOR TAX SAVING, MANY PEOPLE USE IT AS A TAX SAVING TOOL, AS
WELL.
LET’S START WITH THE FIRST STAGE:
AGE 21 TO 25 YEARS - CAREER START - IF YOU ARE IN THIS STAGE, THEN YOU ARE
JUST BEGINNING YOUR CAREER. RESPONSIBILITIES ARE USUALLY MINIMAL AT THIS
STAGE. WHATEVER YOU EARN, IS MAINLY TO SUSTAIN YOUR OWN LIFESTYLE AND
ALSO BUILD A PORTFOLIO FOR YOUR FUTURE.
THUS, WHAT YOU NEED AT THIS STAGE IS PROTECTION AND SAVINGS.
AGE 26 TO 32 YEARS - RISING INCOME - IF YOU ARE IN THIS STAGE, THEN YOUR
INCOME IS BOUND TO HAVE GONE UP FROM WHAT IT WAS AT THE START OF YOUR
CAREER. RESPONSIBILITIES ARE ALSO RISING WITH MARRIAGE AND KIDS; ASSET
ACQUISITION IS ALSO OF HIGH PRIORITY.

4. THUS WHAT YOU NEED AT THIS STAGE IS SAVINGS, GROWTH, LIQUIDITY AND
PROTECTION.
AGE 33 TO 45 YEARS - PEAK OF HIS CAREER - IF YOU ARE IN THIS STAGE, THEN YOUR
INCOME WOULD ALMOST BE AT AN ALL-TIME HIGH AS YOU HAVE HIT THE PEAK OF
YOUR CAREER. RESPONSIBILITIES ARE USUALLY VERY HIGH WITH EQUAL AMOUNT
OF PERSONAL LIFE PRIORITIES LIKE CHILD’S EDUCATION AND BORROWED LOANS.
THUS WHAT YOU NEED AT THIS STAGE IS INVESTMENT, SECURITY, LIQUIDITY AND
PROTECTION.
AGE 46 TO 55 YEARS - DECREASING RESPONSIBILITIES - IF YOU ARE IN THIS STAGE
THEN YOUR RESPONSIBILITIES WOULD GRADUALLY REDUCE AS YOU ARE
APPROACHING RETIREMENT AND YOUR KIDS ARE BECOMING INDEPENDENT
THUS WHAT YOU NEED AT THIS STAGE IS SECURITY AND PROTECTION.
AGE 56 TO 60 YEARS - RETIREMENT - IN THIS STAGE, YOU HAVE ALMOST REACHED
RETIREMENT OR ALREADY HAVE RETIRED. THERE WOULD BE A REQUIREMENT FOR
LUMP-SUM INVESTMENT, WITH THE AMOUNT RECEIVED AT RETIREMENT WITH
SUBSTITUTE INCOME
THUS WHAT YOU NEED AT THIS STAGE IS LIQUIDITY AND PROTECTION.
FOR LIQUIDITY, YOUR INVESTMENT NEEDS TO BE PLANNED OUT ACCORDING TO THE
STAGE AT WHICH YOU WOULD REQUIRE THE LIQUIDITY. AS IN, YOU COULD OPT FOR
PLANS, FOR REGULAR CASH INFLOW, WHERE THE OPTION FOR PARTIAL OR
COMPLETE LIQUIDITY IS AVAILABLE AFTER COMPLETION OF THREE YEARS.
PROTECTION, AT THIS STAGE WOULD MEAN A REGULAR FLOW OF INCOME FROM THE
LUMP SUM INVESTMENT. PLAN WHICH WOULD PROVIDE PENSION ACCORDING TO
THE OPTION CHOSEN.
LIFE INSURANCE REQUIREMENT MAY BE DIFFERENT FOR DIFFERENT PEOPLE, NOT
ONLY DEPENDING ON THEIR LIFE STAGE. LET US UNDERSTAND BY THE FOLLOWING
EXAMPLES.
IF YOU ARE MARRIED - MOST FAMILIES DEPEND ON ONE OR TWO INCOMES TO MAKE
ENDS MEET. IF YOU SUDDENLY DIED, WILL YOUR FAMILY MAINTAIN ITS STANDARD OF
LIVING ON YOUR SPOUSE’S INCOME ALONE? PROBABLY NOT. LIFE INSURANCE
MAKES SURE THAT YOUR PLANS FOR THE FUTURE DON’T DIE WHEN YOU DO.
IF YOU ARE A SINGLE PARENT - AS A SINGLE PARENT, YOU7RSQUO;RE THE
BREADWINNER, COOK, CHAUFFEUR, AND SO MUCH MORE. YET NEARLY FOUR IN TEN
SINGLE PARENTS HAVE NO LIFE INSURANCE WHATSOEVER, AND MANY WITH
COVERAGE SAY THEY NEED MORE. THUS THEY ARE EITHER NOT INSURED OR
UNDERINSURED. WITH SO MUCH RESPONSIBILITY RESTING ON YOUR SHOULDERS,
YOU NEED TO MAKE DOUBLY SURE THAT YOU HAVE ENOUGH LIFE INSURANCE TO
SAFEGUARD YOUR CHILDREN’S FINANCIAL FUTURE.

5. IF YOU ARE A WORK-AT-HOME PARENT - JUST BECAUSE YOU DON’T EARN A SALARY
DOESN’T MEAN YOU DON’T MAKE A FINANCIAL CONTRIBUTION TO YOUR FAMILY.
CHILDCARE, TRANSPORTATION, CLEANING, COOKING, AND OTHER HOUSEHOLD
ACTIVITIES ARE ALL IMPORTANT TASKS, THE REPLACEMENT VALUE OF WHICH IS
OFTEN SEVERELY UNDERESTIMATED. COULD YOUR SPOUSE AFFORD TO PAY
SOMEONE FOR THESE SERVICES? WITH LIFE INSURANCE, YOUR FAMILY CAN AFFORD
TO MAKE THE CHOICE THAT BEST PRESERVES THEIR QUALITY OF LIFE.
IF YOU ARE RETIRED - YOU HAVE EARNED ALL YOUR LIFE AND NOW JUST BECAUSE
YOU ARE NOT EARNING ANYMORE, WOULD YOU WANT TO BE A BURDEN ON
SOMEONE ELSE? WOULD YOU WANT SOMEONE TO “LOOK AFTER” YOU EVEN WHEN
YOU CAN AFFORD TO PLAN YOUR LIFE AND HAVEN7RSQUO;T? WELL, IF THAT’S NOT
SO, THEN WHY NOT HAVING A PROPER PLAN IN PLACE SO AS TO TAKE CARE OF YOU.
LIFE INSURANCE WOULD ALSO HELP YOU TO MAINTAIN YOUR LIFETIME INCOME. LIFE
INSURANCE PROCEEDS ARE GENERALLY INCOME TAX FREE AND CAN BE ARRANGED
TO AVOID TAX. FINALLY, IF YOUR INSURANCE PROGRAM IS PROPERLY STRUCTURED,
THE PROCEEDS FROM YOUR LIFE INSURANCE POLICY WON7RSQUO;T ADD TO YOUR
TAX LIABILITY.
IF YOU ARE A SMALL BUSINESS OWNER - BESIDES TAKING CARE OF YOUR FAMILY,
LIFE INSURANCE CAN ALSO PROTECT YOUR BUSINESS. WHAT WOULD HAPPEN TO
YOUR BUSINESS IF YOU, ONE OF YOUR FELLOW OWNERS, OR PERHAPS A KEY
EMPLOYEE, DIED TOMORROW? LIFE INSURANCE CAN HELP IN A NUMBER OF WAYS.
FOR INSTANCE, A LIFE INSURANCE POLICY CAN BE STRUCTURED AS “PARTNERSHIP
INSURANCE”. THIS WOULD ENSURE THAT THE REMAINING BUSINESS PARTNERS
HAVE THE FUNDS TO BUY THE COMPANY OF A DECEASED OWNER AT A PREVIOUSLY
AGREED UPON PRICE. THAT WAY, THE OWNERS GET THE BUSINESS AND THE FAMILY
GETS THE MONEY. TO PROTECT A BUSINESS IN CASE OF THE DEATH OF A KEY
EMPLOYEE, “KEY PERSON INSURANCE,7RDQUO; PAYABLE TO THE COMPANY,
PROVIDES THE OWNERS WITH THE FINANCIAL FLEXIBILITY NEEDED TO EITHER HIRE
A REPLACEMENT OR WORK OUT AN ALTERNATIVE ARRANGEMENT. THERE ARE MANY
WAYS TO WORK OUT WHAT SUITS YOUR REQUIREMENT THE BEST.
IF YOU ARE SINGLE - MOST SINGLE PEOPLE DON’T NEED LIFE INSURANCE BECAUSE
NO ONE DEPENDS ON THEM FINANCIALLY. BUT THERE ARE EXCEPTIONS. FOR
INSTANCE, SOME SINGLE PEOPLE PROVIDE FINANCIAL SUPPORT FOR AGING
PARENTS OR SIBLINGS. OTHERS MAY BE CARRYING SIGNIFICANT DEBT THAT THEY
WOULDN’T WANT TO PASS ON TO FAMILY MEMBERS WHO SURVIVE THEM, (E.G.,
EDUCATION EXPENSES). IF YOU’RE IN THESE TYPES OF SITUATIONS, YOU SHOULD
OWN LIFE INSURANCE BECAUSE YOU WOULDN’T WANT YOUR LOVED ONES TO BE
BURDENED FINANCIALLY IN THE EVENT OF YOUR PREMATURE DEATH.
HENCE, LIFE INSURANCE SHOULD BE PLANNED AND THE CORRECT AMOUNT OF LIFE
INSURANCE NEEDS TO BE PURCHASED BUT ONLY AFTER EVALUATING THE
REQUIREMENT AND THE NEED DEPENDING ON YOUR LIFE STAGE, PRIORITY AND
CAPACITY. IF PROPERLY PLANNED, THE LIFE INSURANCE CAN BE THE ANSWER TO A
SOUND FINANCIAL PLANNING FOR LIFETIME!

6. INSURANCE VS MUTUAL FUNDS
HOW CAN ONE COMPARE UNIT-LINKED PLANS OF INSURANCE COMPANIES, WHICH
ARE AGGRESSIVELY PROMOTED AS INVESTMENT PRODUCTS WITH INVESTMENTS
MADE DIRECTLY IN MUTUAL FUND SCHEMES?
BOTH THESE INSTRUMENTS ARE DESIGNED TO SERVE DIFFERENT PURPOSES AND
ARE NOT COMPARABLE. A UNIT-LINKED PLAN FROM AN INSURANCE COMPANY IS AN
INSURANCE POLICY DESIGNED TO PAY A LUMP SUM ON MATURITY OR ON DEATH IF
EARLIER. PREMIUM PAID UNDER THESE PLANS IS ELIGIBLE FOR TAX DEDUCTION
UNDER SECTION 88 OF THE INCOME TAX ACT. ON THE OTHER HAND, MUTUAL FUNDS
ARE INVESTMENT AVENUES TO PARTICIPATE IN THE GROWTH OF FINANCIAL
MARKETS AND DO NOT PROVIDE ANY TAX DEDUCTION (EXCEPT ELSS AND PENSION
FUNDS).
FOR A UNIT-LINKED INSURANCE PLAN, PROVIDING LIFE COVER IS THE MOST
IMPORTANT FUNCTION; RETURNS ARE JUST AN ADDED BENEFIT, WHICH GETS
MAGNIFIED, GIVEN THE TAX REBATES. THOUGH UNIT-LINKED PLANS OFFER
TRANSPARENCY IN RETURNS IN TERMS OF NET ASSET VALUE AND FLEXIBILITY IN
INVESTMENT OPTIONS IN DEBT, EQUITY OR A MIX OF BOTH, THESE ADVANTAGES
REMAIN SECONDARY. WHEREAS FOR A MUTUAL FUND, THE MAIN OBJECTIVE IS TO
PROVIDE RETURNS.
MOREOVER, UNIT-LINKED PLANS ARE NOT AS LIQUID AS MUTUAL FUNDS. THERE IS A
LOCK-IN OF THREE YEARS. EVEN IF ONE REDEEMS AFTER THREE YEARS, YOU
WOULD BE AT A LOSS BECAUSE OF HIGHER INITIAL ADMINISTRATIVE CHARGES. FOR
EXAMPLE, THE UPFRONT CHARGES FOR THE FIRST TWO PREMIUM AMOUNTS ARE AS
HIGH AS 20-27 PER CENT. THEN THERE IS AN ANNUAL MANAGEMENT FEE OF 0.8-1.25
PER CENT AND A FLAT FEE OF RS 15-20 PER MONTH. FINALLY, THERE IS A
DEDUCTION FOR RISK COVER. THIS GOES TOWARDS CONTRIBUTION TO THE SUM
ASSURED OR THE LIFE INSURANCE COVER, WHICH IS BASED ON MORTALITY RATES
AS CALCULATED BY ACTUARIES. THOUGH MUTUAL FUNDS TOO HAVE ENTRY AND
EXIT LOADS (MAXIMUM 2 PER CENT) AND EXPENSES (MAXIMUM 2.5 PER CENT),
THESE COSTS ARE LOWER THAN UNIT-LINKED PLANS.

7. LIFE INSURANCE VIS-À-VIS MUTUAL FUND
WHETHER ONE SHOULD INVEST IN LIFE INSURANCE OR MUTUAL FUND. LIFE
INSURANCE AND MUTUAL FUNDS ARE SIMILAR IN SOME ASPECTS.
SIMILARITIES:
BOTH LIFE INSURANCE AND MUTUAL FUNDS INVEST IN EQUITY OR DEBT
MARKET
BOTH LIFE INSURANCE AND MUTUAL FUND PROVIDE TAX BENEFITS
HOWEVER DESPITE THE FACT THAT RECENT CHANGES IN LIFE INSURANCE MIGHT
MAKE LIFE INSURANCE AND MUTUAL FUND SEEMS ALIKE, THERE IS FUNDAMENTAL
DIFFERENCE BETWEEN THE TWO.
DIFFERENCE:
LIFE INSURANCE HAS ITS BASIS AS PROTECTION PRODUCT WHEREAS MUTUAL
FUND IS DEFINED BY ITS INVESTMENT PORTFOLIO.
LIFE INSURANCE IS INSURANCE POLICY WHICH OFFERS COMBINATION OF
SECURITY AND INVESTMENT. LIFE INSURANCE PROVIDES YOU WITH A RISK
COVER AS WELL AS INVESTMENT OPTIONS. THE INVESTMENT OPTIONS VARY
FROM TRADITIONAL MONEY BACK POLICIES TO THE POPULAR ULIP’S. MUTUAL
FUND INVESTS YOUR MONEY IN EQUITY OR DEBT MARKET AND OFFER
RETURN ON INVESTMENT ACCORDINGLY. MUTUAL FUND IS ONLY INVESTMENT
TOOL AND HENCE THERE’S NO LIFE COVER WITH IT.
MUTUAL FUND HAS LOW CHARGES AS THERE’S NO CHARGE AT THE START OF
FUND IF YOU BUY DIRECTLY FROM COMPANY. THERE ARE ALSO LESS
CHARGES IF YOU SURRENDER IN INITIAL STAGES. LIFE INSURANCE PROVIDES
LIFE COVER ALONG WITH INVESTMENT WHICH MAKES IT MORE EXPENSIVE.
FIFTH YEAR ONWARDS, THERE ARE NO SURRENDER CHARGES.
MUTUAL FUNDS ARE SHORT TERM COMPARED TO LIFE INSURANCE WHOSE
AVERAGE POLICY TERM IS 15-20 YEARS.
LIFE INSURANCE POLICIES HAVE LOCK-IN PERIOD OF 5 YEARS WHEREAS
THERE’S NO SUCH THING IN MUTUAL FUND
REGULAR PREMIUM HAVE TO BE PAID IN LIFE INSURANCE POLICIES WHEREAS
YOUR INVESTMENT CAN BE STOPPED ANYTIME IN MUTUAL FUND.
LIFE INSURANCE HAVE MANY VARIANTS LIKE MONEY BACK POLICIES, UNIT
LINKED INSURANCE POLICIES ETC. MUTUAL FUNDS HAVE FEWER TYPES.
HENCE IT IS EVIDENT THAT MAJOR DIFFERENCE LIE BETWEEN LIFE INSURANCE AND
MUTUAL FUND. IT IS ENTIRELY DEPENDENT ON YOUR NEEDS AND REQUIREMENTS.
LIFE INSURANCE IS YOUR PRODUCT IF YOU LOOKING FOR LONG TERM COMPLETE
PACKAGE OF INVESTMENT AND SECURITY. MUTUAL FUND IS YOUR PRODUCT IF YOU
LOOKING FOR INVESTMENT OPTION ONLY.