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Why Insurance is not an Investment


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Insurance and Investment go hand in hand but they are not same

Published in: Real Estate
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Why Insurance is not an Investment

  1. 1. Safety of my clients’ investment comes first, always and every time
  2. 2. My team member’s welfare and training comes next
  3. 3. My own ease and comfort comes last, always and every time
  4. 4. Real Estate Investments Olive Green Realty
  5. 5. Olive Green RealtyLearning Objective INSURANCE INVESTMENT
  6. 6. Olive Green RealtyWhat is Insurance? Underwriter assesses the risk Underwriter agrees to cover the risk for a fee (premium) Pays in the event of the risk occurring Definition: How did investment get clubbed with insurance ?
  7. 7. Olive Green RealtyGenesis of Insurance Historically, Government is responsible for its people well-being, including their health cover, compensation for loss of life and property etc. This is classified as a government’s ‘Social burden’. Government started encouraging individual purchase of insurance to reduce its own social burden and pass the cost on to its people.
  8. 8. Olive Green RealtyInvestment + Insurance? • Limited Funds – Therefore, risk was not the overriding consideration. • Saving and Investment – These were equally important survival requirements. • Confidence in one’s own well-being – Old age and death, though certain, is overlooked as it is not considered imminent. People were resistant towards taking insurance due to: Therefore, additional benefits of saving and returns were invented. Government further incentivized it through ‘tax breaks’ in insurance purchase.
  9. 9. Olive Green RealtyInvestment + Insurance? • General Insurance is not sold as a pure investment product? • Equity and/or Debt products do not ‘bundle’ Insurance in their portfolio offering? If Insurance products were really attractive and high-yielding options for investment, then one wonders why:
  10. 10. Olive Green RealtyInvestment options Gold It was the only asset class usually viable Historically, before liberalization and globalization, there were limited products for investment: Equity Stock markets were an unknown entity and generally feared. Real Estate It was considered ‘Elitist’ due to non-availability of easy loan. LIC (Life Insurance Corporation) was the only company providing Government’s stamp and sanction to the purchase, making it a ‘safe’ option.
  11. 11. Olive Green RealtyInsurance Premium Every Insurance Investment product is a bundling of ‘Term Insurance’ Insurance Premium Term Insurance Premium Investible Surplus Administrative Costs = + + Risk Cover Administrative Costs +
  12. 12. Olive Green RealtyInsurance = Investment What should be done: • Purchase ‘Pure Risk’ (Term Insurance) cover to safeguard assets. • Increase this cover over a period of time to absorb Inflation and Enhancement in your financial stature. • Invest Surplus in asset classes of your choice, such as: • Equity • Real Estate
  13. 13. Safety of my clients’ investment comes first, always and every time Olive Green Realty