In financial planning, striking a balance between insurance and investment is a vital decision that can shape your financial security.
As you embark on your journey towards a financially stable future, a crucial question may arise:
“Should I prioritize insurance or investment?”
This question warrants careful consideration, as both offer distinct benefits and serve unique purposes.
Insurance is not investment and vice versa. The goal of insurance is to protect you financially from future risks, while investment helps you to build your wealth.
In this article, we delve into the pivotal question of which should come first: insurance or investment.
Difference between Insurance and Investment
| # | Insurance | Investment |
| 1 | Serves as financial aid. | Helps you get returns on your money. |
| 2 | Serve as financial protection/coverage against uncertainties. | Grows your wealth by allocating funds to different assets. |
| 3 | Does not offer returns but financial protection against losses. | Returns on investment can be high or low. |
| 4 | Is for a specific period of time. | Allows accumulating wealth over an extended period. |
| 5 | There is no risk involved. | It involves some amount of risk. |
Should you Insure or Invest First?
To know which to choose first between Insurance and Investment, you have to identify and understand your financial goal.
In general, it is advisable to first establish a solid foundation of insurance coverage before diving into investments.
Insurance serves as a safety net, protecting you and your loved ones from unexpected events and creating a financial cushion that gives you peace of mind.
Once you have a solid insurance plan in place, you can focus on building your investment portfolio. Investments offer the opportunity to grow your wealth over time and achieve long-term financial goals.
However, it’s crucial to strike a balance between risk and reward, diversify your investments, and seek professional advice to make informed decisions aligned with your risk tolerance.
>> Take our risk assessment.
Is Insurance an Investment?
Insurance and investment are two different financial instruments. While insurance is designed to protect against unforeseen financial risks, investment is designed to build and grow wealth over time.
At what age should you get life insurance?
The younger you get life insurance, the better. Health conditions usually arise in old age, which attracts a higher rate. At age 25, you are most likely going to pay less for life insurance than at age 40.
Is Insurance a liability or an asset?
It depends on the perspective it is being considered from. From the insurance company, it is seen as a liability because they must provide coverage for the insured. However, for the insured, it is considered an asset because insurance provides financial coverage for losses.
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If your financial goal is to build and multiply wealth, then your best option is to invest. At Cowrywise, we have the largest collection of mutual funds in the country and you can begin investing in low to moderate-risk assets.
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Thanks for sharing this
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An investor can use options contracts to
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