Investment vs Insurance: Stop Confusing the Two – Learn the Truth

In India, it is common to hear someone say, “I’ve invested in LIC” or “I bought an insurance policy as an investment.” But here’s the hard truth: Insurance is not an investment.

At MyWealthBuddy, we’ve seen how many people unknowingly mix up investment and insurance, often due to mis-selling by agents chasing high commissions. In this blog, let’s break this myth and help you make smarter financial decisions.

Feature	Investment	Insurance
Purpose	To grow wealth	To protect your family (financial risk coverage)
Returns	Higher potential returns (8–15%)	Low or negligible returns (4–6%)
Risk	Varies (depending on product)	Low risk (focus is on coverage)
Examples	Mutual Funds, PPF, Stocks	Term Plan, Health Insurance, Life Cover

Investment vs Insurance

The Problem: Mis-selling of Insurance as Investment

Many agents show glossy brochures with large maturity amounts and say, “You’ll get ₹20 lakh after 20 years. It’s a great investment!” But here’s what they don’t tell you:

• The actual return on most traditional policies (like endowment or money-back) is only 4–6% per year

• Inflation-adjusted, your money loses value over time

• You’re paying for life cover + returns, which is neither sufficient protection nor strong growth

They do this because these products offer huge commissions to agents – sometimes up to 25–35% of your first premium!

Why This Matters

When you lock your money in such low-return policies:

• You miss the opportunity to grow your wealth through equity or mutual funds

• Your family is underinsured, because insurance amount is usually too small

• You feel cheated later when you calculate actual returns

  
  

✅ Correct Approach: Separate Insurance & Investment

The smart and simple way is this:

1. Buy a Term Insurance Policy

   • Cheap and high cover (e.g., ₹1 Cr cover for ₹10,000/year)

   • No returns — and that’s okay, it’s pure protection

2. Invest the rest in High-Growth Options

   • Mutual Funds via SIP

   • PPF, NPS, ELSS (for tax-saving + wealth)

   • Stocks (if you’re knowledgeable)

Example: Instead of putting ₹1 lakh/year into a money-back plan for 20 years, take ₹10k/year for term cover and invest ₹90k in mutual funds. After 20 years, you may have ₹50+ lakh instead of ₹20 lakh.

Our Mission at MyWealthBuddy

We’re here to educate, not sell. Our goal is to help people in small towns and cities understand the real value of money and avoid getting trapped in financial products that look good but perform poorly.

Quick Tips to Avoid Insurance Traps

• Always ask: What’s the actual IRR or annual return?

• Don’t buy insurance from friends/relatives without understanding

• Prefer term insurance + SIP for real growth and safety

• Consult a SEBI-registered advisor or trusted mutual fund distributor

Conclusion

Remember: Insurance is for protection. Investment is for wealth creation.

Mixing both will only lead to poor returns and poor coverage.

At MyWealthBuddy, we help you plan smart, stay safe, and grow your money the right way. If you’ve already bought a mixed product, don’t worry — message us, and we’ll help you review and realign your plan.