Difference Between Insurance and Investment

In this advanced era, everyone’s thinking is also advancing. In this case, it can be seen that many people are thinking about their future life by investing or insurance. However, do you know, what is the difference between insurance and investment?

Insurance vs Investment

Insurance and investment are two very different things, although both are very good and provide benefits for the life to come.
Investment is the investment of capital which is usually called shares into a company or a project with the hope of making a profit later.
While insurance is an activity carried out by paying a certain amount of money to an insurance company for personal and family protection. This protection is given if you later experience an unpredictable or unexpected risky event. In fact, there are also differences between sharia and conventional insurance which are similar but not the same.
Well, from the understanding between investment insurance that has been described above, have you been able to determine what are the differences between investment and insurance? If you can’t tell the difference, let’s take a closer look at the differences between insurance and investment in detail and depth below.

4 Differences in Insurance and Investment that We Must Know

1. Financial Goals

One of the differences between investment and insurance is financial goals. This one difference is a very clear difference between investment and insurance. In this case, the investment objective from a financial perspective is the development of the assets being invested.
But keep in mind, if you want to invest, you have to be prepared with the risks that you will have to face later. This risk can be in the form of failure or loss caused by the investment you make, the same as previously discussed in the difference between investing and trading.
Then, what is the financial purpose of insurance? From a financial point of view, insurance itself the purpose of protecting yourself or your family and loved ones. And the flow is that you deposit a certain amount of money which is usually done every month to the insurance company.
Then, you can use the money you deposited if you experience a risky event that you couldn’t predict and predict beforehand. These events can be in the form of accidents, deaths, critical illnesses, to health care.

2. Risk Level

The next difference between insurance and investment is in terms of the level of risk. Of course, because investment and insurance are different, as explained earlier, the level of risk between investment and insurance is also different.
In this case, it can be said that the investment has an uncertain level of risk. This is of course because the funds or capital that you invest or invest also goes up and down, or commonly referred to as fluctuating. Where these ups and downs are influenced by market conditions, things that also play an important role in differences and investment.
Not only that, the profits or returns that you get are also not certain to be stable and even increase all the time. The reason, of course, is because the return obtained is based on the reference interest rate every day. That way, today you can get a high return, and tomorrow you get a low return.
Compared to investment, insurance has a certain or guaranteed level of risk. And the money you deposit every month as self-protection later the amount will not decrease. Conversely, over time, the amount of money you deposit will actually increase.
However, there is one thing you must do so that you do not use too much insurance money. Here, you have to control your finances. Where you have to make sure if you can control your finances, so you can buy insurance premiums or pay some money to the insurance every month.

3. Results

Next, there is the other between investment and insurance that you should know. The difference is a result. In this case, the result in question is the result that you will get later from your investment or insurance.
Then, what is the difference you get from investment and insurance? If you carry out insurance activities by paying a certain amount of money every month, then the result you will get is self-protection.
For example, if you choose life insurance, and one day you die, then the result will be in the form of sum assured. The sum assured can be used by your family to continue living. However, if you choose health insurance, and one day you get sick and have to be hospitalized, then the hospital fee can be replaced with insurance.
Meanwhile, if you choose to invest, the results you can get are profits in the form of assets that you can liquidate in cash. However, as explained in the second point, The results obtained each day differ depending on market conditions.
Then, what if you want to get high returns, you can manage the results you get to invest in other investments. In addition, you can use the results for your business capital so that your profits can increase.

4. Freedom of Funds

Well, the last difference between investment and insurance is the freedom of funds. The flexibility of the funds in question is in the form of funds that you will get later. Well, when compared between investment and insurance, the investment is more flexible. Why is that so?
Investments are more flexible because the results from insurance can be disbursed at any time without you needing to wait for the risks that will occur later. For example, if you want to take the investment returns for personal purposes, such as marriage or vacation or even business, you can take the investment returns and withdraw the results right away.
Well, if you do then you have to be prepared with inflexible funds. This means that the funds or results you get from insurance cannot be disbursed and used as you wish.
In this case, you have to wait for a risk if you want to use the results or investment funds. For example, you have to be sick first to use or feel insurance funds. Then, the results are only to replace the medical costs that you bear, and you cannot use these funds for other things.
Then, if your family wants to feel the funds from the insurance, it means that the risk you have to face is that you have to die. This is because the purpose of life insurance that you do is that the family you leave behind can continue their life well in the future.

Conclusion

Well, those are some of the differences between insurance and investment. Of the four differences, have you decided which one to do, or even both? Well, if you want to choose one, then you need to choose it wise and tailored to your needs yes. Remember, don’t be picky.