This document discusses insurance and investment. It explains that historically, governments encouraged individuals to purchase insurance to reduce the government's social burden and pass costs to citizens. People were resistant to insurance due to limited funds and a preference for saving and investment over risk. Therefore, insurance products bundled additional benefits like returns. The document recommends purchasing term insurance separately to cover risks, and investing any surplus in assets like equity or real estate rather than insurance products marketed as investments.
7. 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 ?
8. 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.
9. 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.
10. 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:
11. 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.
12. 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
+
13. 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
14. Safety of my clients’ investment comes first,
always and every time
Olive Green Realty
www.olivegreenrealty.in