INVESTMENT vs INSURANCE
Many people make the mistake of comparing investment with insurance as though as they are the same thing. Hence the many comments I have received as follows:-
- "I am getting better returns from my business"
- "My investments returns are superior to insurance"
Business needs to be actively managed to get returns and it is NOT always the case that business will get good returns all the time. You can also lose money in business, it is NOT guaranteed. There are a lot of risks out there which can kill your business such as competition, government policy, geo politics, obsolescence caused by technology or other factors. Examples like Nokia, Kodak were once giants but have now become dinosaurs.
Investments can be actively done by oneself or managed by third party. The objective of investment is to get a return on the money you placed in that instrument. Again there is NO guarantee on the return and in some cases you can even lose the capital you put in.
INSURANCE
Insurance is another asset class by itself. The objective of insurance is to manage certain risks in life, hard assets and so forth. It is a RISK mitigation and management tool. It is the only asset class that gives you DOLLARS for your CENTS. Another way to describe it is you pay only interest to get the CAPITAL. For example for a $1million cover you pay only around $10,000 to $30,000 per year depending on age and health status. And the Capital is GUARANTEED. Insurance has DOUBLE dollar benefits, meaning it has BOTH living and death benefits. And the great part about it is that once payout is made you will never be "out of the money". Some insurance plans are designed so that if you fix a specific termination period and if no claim arises, you get back the premium you paid. So there are many different types of insurance plans and the products are either upgraded over time or change. Usually the changes are to the benefit of the insured.
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