Individuals designing a financial plan are often faced with the debate between investment and insurance. While investment and insurance plans are crucial, each serves a different purpose. Investment helps grow your wealth over time and achieve different financial goals, while insurance offers guaranteed financial cover against unforeseen mishaps.

What is Insurance?

Insurance is a legal agreement between the insured and the insurance provider. According to the clauses of this agreement, the insured individual receives compensation from the insurance provider in the event of loss, injury, or damage under specific conditions. The insurance provider offers this compensation in exchange for set premiums, which may be paid monthly or as a lump sum.

Insurance policies can be broadly categorised into life insurance plans like term plans and non-life insurance policies like car, health, property, and travel insurance.
 

What is an investment?

Investment is the act of allocating funds to buy different assets and investment products to generate profits. Common investment instruments include stocks, bonds, mutual funds, property, and ETFs. The profits earned may or may not be guaranteed or fixed depending on the investment instrument selected. Since the risk exposure levels vary based on the type of investment instrument in question, you should choose investments that align with your risk appetite and investment objectives.

For instance, if you are a low risk investor, you can opt to invest in fixed deposits or bonds. However, you can consider equity stocks and equity-focused MF if you have a high risk tolerance.
 

Insurance vs Investment

If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.60% p.a.

Conclusion

Both insurance and investment plans are vital pillars of a strong financial plan. The differences between insurance and investment plans simply highlight the fact that each meets a different requirement. While one helps create a financial safety net against uncertainties and avoid expense burdens, the other focuses on generating wealth for the long term. Therefore, deciding between insurance and investment must be based on your goals and requirements.