Some years back Insurance was bought primarily as a saving and to lower the tax burden. Even today people buy Life Insurance for the purpose of saving tax without understanding the logic of Insurance. The proof lies in the fact that maximum number Policies are sold between December and March just before the financial year end. Just because buying Life Insurance lowers your tax burden it is understood by most people that it is the best form of Investment. Most people do not understand that the basic Logic of Life Insurance is to provide security to your Family from an unfortunate event.

Life Insurance serves two basic purposes :

Providing Financial Security to your Family in case of an unfortunate event.

• Inculcate the habit of Saving for the future.

• Important tool for wealth transfer.

It is always better to avoid mixing your Insurance with Investments. Insurance should be bought for protecting your financial future and for securing your financial future. On the other hand investments should be done for creating wealth for the future and insuring that your assets generate income on a long term. There are a lot of Insurance Policies offered by Insurance Companies with provide Life Insurance Cover as well as benefits of Mutual fund Investments. It is good for people who do not have time to focus on Investments products. ULIP’s ( Unit Linked Insurance Plans ) are the most common form of this kind schemes.
You get units just like in a mutual fund. A part of premium goes to provide an insurance cover (mortality charge) and the rest is invested like in a mutual fund. However, the only drawback is the charges in the first year for some companies.Select a plan which has the lowest charges and where a large portion is available investment.

If your intention is only Invetment then prefer diversified equity Mutual funds over ULIPs(Unit Linked Insurance Plans).

Why pay costs of 20%-60% on your investments in the first or any year. Some insurance enthusiasts might propagate that insurance is for the long term. You cannot copmare apples with oranges and in this case also Insurance Products and Mutual funds cannot be compared alone.