Investments play a pivotal role in helping secure a financially stable and independent future. However, there are numerous investments to choose from, including stocks, mutual funds, bonds, gold, and real estate. Or, you can buy a life insurance policy to create a financial safety net for your loved ones. In this article, we will discuss two of the most common investment instruments – Mutual Funds and Life Insurance policies.

Life Insurance Policies

A life insurance policy is a financial product that offers financial protection to the family of the policyholder in the event of his/her untimely demise. There are different types of life insurance plans available like term insurance policies, unit-linked investment plans (ULIPs), monthly income plans, pension plans, and many others. There are many insurance providers offering a range of plans. You can choose a Tata AIA Life Insurance policy from the range of options available on our site.

Mutual Fund Investment

Mutual funds are investment instruments that collect money from investors with similar financial preferences and invest them in securities based on the objective of the scheme. These securities include shares, bonds, money market instruments, etc.

All You Need to Know About Mutual Fund and Insurance

Mutual funds and life insurance policies are different types of instruments allowing investors to secure their financial future.

Definition

A mutual fund is an investment product that allows you to invest money in various securities to earn returns. The mutual fund returns are based on the performance of the underlying securities of the scheme.

On the other hand, a life insurance policy is a protection product that offers a sum assured to the family of the policyholder in the event of his/her death.

• Risk of capital loss
  When you invest in a mutual fund, the fund manager invests the money in market-linked securities to generate returns.
  
  When you purchase a life insurance policy, there is no such risk since the funds are not invested on your behalf. As long as you ensure that all your premium payments are made on time, then the nominee will receive the death benefit.
  
  
• Reasons Behind Saving in Mutual Funds and Life Insurance Plans
  
• Mutual funds – Generation of wealth
  
• Life Insurance – Creation of a financial safety net for your family when you are not around
  
  
  
• Returns on Investment
  
  

  

When you buy a life insurance policy, you pay the premium every year. The returns of the policy include a death benefit, maturity benefit, and accrued bonuses². Usually, these returns are fixed.

When you invest in a mutual fund, the returns are based on the securities invested.

Types of Products 

Mutual funds are available in many variants, including:

• Equity funds
• Debt funds
• Index funds
• Money market funds
• Balanced funds, and many more
  
  

Life insurance policies can be categorised into:

• Term life insurance that offers financial coverage to the policyholder for a specific period at a fixed cost
• Unit-linked insurance plans(ULIPs) are a combination of life insurance and investment
• Group insurance plans that offer coverage for a group of people under one insurance policy
• Pension plans that can help manage the cost of living post-retirement
• Annuity insurance plans, and many more

 

Which One Do You Need?

Life insurance and mutual funds are two distinct products offering certain benefits to investors. Hence, you need the right combination of the two. Hence, make sure that you have a life insurance policy with adequate cover and invest in mutual funds to achieve your short-term and long-term financial goals.

Conclusion

Every investor is unique and needs investments based on their phase of life. Hence, before choosing, make sure that you assess your financial goals and needs and create a comprehensive financial plan that includes savings, investments, health insurance, and life insurance. Remember, mutual funds are for wealth creation, and insurance is for protection. Hence, don’t mix up the two and choose the right combination of the two for maximum benefits.

L&C/Advt/2022/Aug/2042