Why Insurance Is Not a Good Investment: A Financial Perspective

Insurance is often positioned as a two-in-one solution: protection plus guaranteed returns. But when you dig deeper, most insurance-cum-investment products fall short on both fronts. If you’ve ever wondered whether insurance is a good way to grow wealth, the short answer is no. The real value of insurance lies in protection, not compounding.

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How an Investment Manager Can Help You

Separate Protection from Growth

An expert helps you clearly define what part of your money should go toward protection, and what should go toward growing your wealth

Evaluate True Costs and Returns

They help you assess the real return from your insurance policy after factoring in inflation, charges, and opportunity cost

Recommend Smarter Alternatives

They can guide you toward SIPs and goal-based plans that align with your life goals and provide better long-term outcomes

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President and MD

"The company's 'Dreams into Action' platform is another feather in their cap. It revolutionizes the investment process, making it accessible and interactive. Coupled with their top-notch team that provides hyper-customized financial solutions, they set an example for others in the industry."

Why Insurance Is Not a Good Investment

Traditional plans typically generate only 4–6% returns annually

Returns are not sufficient to beat inflation, which ranges between 5-7%

A large share of your premium goes into commissions and policy charges

These products have long lock-ins and offer poor surrender value early on

You can’t change or adjust them based on your evolving financial needs

What Our Clients Say

1800+ Google Reviews. A 4.7 Star Rating. Zero Sales Targets.

“I have been associated with Finedge for more than 5 years. Service level is extremely high and I appreciate the response time as well. My RM is MS Surbhi and she is having good knowledge and always been guiding very well. I truly appreciate the way my portfolio has been maintained and managed. Wish you all the luck.”

Kapil Gupta

What Our Clients Say

1800+ Google Reviews. A 4.7 Star Rating. Zero Sales Targets.

“I have been a client of Finedge for the past seven years, and my experience with them has been exceptional. Their team is highly professional, and their advice has consistently helped me make informed financial decisions. Their communication is clear, and their recommendations are always well-researched and insightful. Currently, my advisor is Sanchita, and I truly appreciate her expertise and professionalism. She is knowledgeable, proactive, and always ensures that my financial goals are well-aligned with the right strategies. I highly recommend Finedge to anyone seeking reliable and expert financial advisory services.”

Souvick Chattopadhyay

What Our Clients Say

1800+ Google Reviews. A 4.7 Star Rating. Zero Sales Targets.

“I've been managing my SIP investments through FinEdge for a while now and the experience has been excellent. A big part of that is thanks to my advisor, Archana. She's incredibly proactive and always ready to assist with any queries. Her positive attitude and dedication make a real difference, and it's clear that FinEdge genuinely aims to help clients.”

Niharika Sharma

Wrong Reasons to Treat Insurance Like an Investment

Many people continue with bundled insurance products simply because of sales pressure, sunk cost bias, or tax-saving habits. But that doesn’t make them good investments.

Continuing out of Guilt or Regret

Paying premiums only to “get something back” often means throwing good money after bad.

Believing in Tax-Saving Myths

Saving tax is a benefit, not a reason to commit to a poor financial product

Trusting the Word ‘Guaranteed’ Blindly

Guaranteed returns often hide extremely low growth after accounting for inflation

Mr. Ankur Arya's Dreams into Action

"My trust in FinEdge has grown and they have become partners for my goals and their achievement. My relationship with my portfolio manager has remained strong and I do share a level of trust with him. I particularly like the process followed by FinEdge for investing as I feel is well researched and adds value to me."

~ Ankur Arya, Captain in Merchant Navy

Why You’re Losing Out by Combining Insurance and Investment

Let’s say you invest ₹10,000/month for 20 years:

In a traditional LIC plan (~6%), you may end up with ₹52.5 lakhs.
In an equity mutual fund (~12%), your investment could grow to ₹98 lakhs. (*assumed not guaranteed rate of return)

That’s a ₹45 lakh difference, enough to fund a child’s education, boost your retirement, or fulfil multiple goals. The gap is caused by charges, low yields, and poor compounding, all of which make insurance a weak investment option.

Why Choose FinEdge

FinEdge’s goal-based investing platform, Dreams into Action (DiA) blends cutting-edge tech and human expertise to provide unbiased investment guidance.

No Sales Targets
No Product Pushing
No Cross Selling/Upselling

People Purpose Product Personalization Process

FAQs

Why is insurance not considered a good investment?

Because its primary purpose is protection, not wealth creation. Most traditional plans yield only 4–6% p.a., which is inadequate to beat inflation over the long term.

What should I do if I’ve already invested in a traditional insurance policy?

If you've paid 3+ premiums, explore the paid-up or surrender option. An expert can help you assess which one suits your goals better.

Can I replace an insurance policy with SIPs?

Yes. SIPs offer better returns, liquidity, and customization. But do make sure you’re also covered with a pure term plan for protection.

Will I lose money if I surrender my policy early?

Possibly. But with the right reinvestment plan and enough time, you could more than recover and outperform the returns of the insurance policy.