Insurance and investment are both necessary instruments in today’s time. But in order to maximise their utility in your financial plan, you must understand the difference between insurance and investment.

Insurance vs Investment – What do they mean?

Life Insurance: Simply put, life insurance is a means of financial protection of the nominee(s) in case of an unfortunate event with the policyholder.

Investment: Investment is a means of allocating money in financial assets, with the expectation of a future benefit. Typically, you receive these benefits in the form of income payments or capital gains.

Insurance vs Investment - Benefits

Insurance: Your family depends upon your income for their livelihood and well-being. If an unforeseen event occurs, your life insurance payouts can cover for this risk and enable them to continue to live their life without any financial worry.

Investment: It offers the potential for high returns. You may have several financial objectives, such as buying property, paying for children's higher education, or securing your financial freedom in retirement. Investments allow you to build your wealth to meet these goals with ease.

Insurance vs Investment - How it Works

Life Insurance: In case of an unfortunate event with the insured, the nominee(s) of the insured get(s) a pre-determined sum of money. For this to happen, the insured needs to pay a fee called premium to the insurer in advance.

Investment: The purpose of investment is to grow your capital. You can go for aggressive growth with equity funds if you can bear market fluctuations. Conservative investors can opt for fixed income debt funds. A more balanced approach is also possible with hybrid funds, offering a mix of both.

Insurance vs Investment – Both are essential

Once you understand the difference between investment and insurance, you will realise that both these instruments are essential. Investments take care of your immediate and long-term financial needs. Insurance takes care of your loved ones against the uncertainties of life. Also, while investments may need time to grow and provide financial protection, insurance cover starts almost immediately.

While both serve different purposes, a secure financial future for yourself and your family needs both instruments. Hence, while you should choose an investment plan as per your long term investment goals and risk appetite, you should also select a life cover sufficient to meet your loved ones' financial needs in case of mishaps.

Conclusion

Despite the difference between investment and insurance, you must not forego one in favour of another.

Unit Linked Insurance Plans (ULIPs) merge insurance with investment. They provide the dual benefit of life cover and capital growth. Part of your premium is allocated to your life cover. The insurance company invests the rest into a mix of equity and debt funds as per your risk tolerance capacity.

At the time of maturity, you get the maturity amount as per the market value of your chosen funds. In case of an undesirable incident during the policy term, your family receives the monetary benefit. The gains can beat inflation and create wealth.

ICICI Pru Signature¹ is a lucrative ULIP² offering flexible investment options. The benefits include:

• Allocation of your entire premium into the funds you choose without any deduction³
• Low charges³, returning of some of the fees at maturity
• Choice of four investment strategies⁴
• Loyalty rewards like wealth booster for staying invested through additions to your fund value, boosting your earnings⁵
• Option for life cover⁶ up to 99 years of age, keeping your family safe against financial troubles

Thus, you can consider investing the ICICI Pru Signature ULIP to meet both your insurance and investment needs.

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