What are the main differences related to Saving, Life Insurance and Investing?
Saving is NEVER an INVESTMENT and will never get better return as it is almost risk free. There will NEVER be such investment product where there is almost risk free and yet gives good returns. All investment products by nature carry risks and you may potentially lose some or all your investing capital. The provider of such investment product need to be able to earn good margins for them to assume the risks on your behalf. In another word, they assume your risks and expected to be paid first before giving you the leftovers.
Generally, the purpose of life insurance is to provide peace of mind by assuring that financial loss or hardship will be lessened or eliminated in the event of death or permanent disability or in some cases critical illnesses if covered.
The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.
Since life insurance is not really a "good" investment product so don't expect better returns. So do you use Life insurance as an investment for retirement planning? Weigh the pros and cons carefully when deciding whether life insurance has a place in your investment or retirement plans. If it does, educate yourself and shop wisely as you are sinking probably a huge sum of your potential investing capital in life insurance; and knowing what are your opportunity costs.
A better option is to spare some of your valuable time in educating yourself in active investing and builds a well balance portfolio of saving, life insurance, and investment. Happy learning. Cheers!
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