Which One Should You Prioritise, Investing Or Insurance?

While investing creates opportunities for wealth-building, an insurance cover offers much-needed financial protection, and as such, both are vital for your financial well-being in the long run.

Kamlesh Rao

Updated on: 5 September 2023 5:30 am

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Photo: Given A Choice Between Investing And Buying An Insurance Cover, Which One Should You Prioritise And Why?

Both investing and insurance coverage play crucial roles in achieving overall financial security and meeting long-term financial goals, and one cannot be ignored in favour of the other.

Here’s the argument for insurance coverage. Given limited surplus funds, prioritising insurance coverage is essential to protect yourself and your loved ones from unforeseen events. Life insurance provides a safety net in case of the policyholder’s untimely demise, ensuring that their family’s financial future is secured. If you have dependents or significant financial obligations, such as outstanding loans or mortgage, having life insurance coverage is critical. Life insurance can help cover outstanding debts, education expenses, daily living costs, and other essential needs in your absence, providing peace of mind to you and your loved ones.

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While insurance coverage is a priority for financial protection, investing is also essential for long-term wealth building and achieving financial goals. Even with limited funds, starting early with small investment amounts can have a significant impact on wealth accumulation over time.

Investing allows you to participate in the growth of the financial markets and potentially generate returns that can help you meet specific objectives, such as retirement planning, purchasing a home, or funding education. By starting early, you can take advantage of the power of compounding, which will amplify the returns over the long term.

To strike a balance, consider a combination of term life insurance for protection and systematic investment plans (SIPs) or other disciplined investment approaches in assets, such as mutual funds to start building wealth.

Review your financial situation, goals, and risk tolerance to determine the appropriate allocation between insurance and investments. If necessary, consult a qualified financial advisor to create a personalised plan that suits your specific needs. Prioritising both aspects will contribute to a comprehensive financial strategy that will ensure your family’s financial well-being at present and secure a prosperous future.

The author is the MD & CEO of Bajaj Allianz General Insurance.