Term Insurance or Investment- Which one should you choose first?

The first paycheck, no matter how small or big it is, always comes with a sense of accomplishment. The cheque, unlike your dreams, is limited and limits your possibilities of what can be done with it. You must, therefore, prioritise. Generally, it is seen that one has three options to use their first salary: 

  • Spend money on something you’ve always desired.
  • Invest to earn more in the future
  • Buy insurance for financial protection in case something happens to you.

The decision of whether to invest first or get insurance for protection should not be difficult. However, it is that question that makes one wonder whether to buy term insurance first or park their money in an investment scheme. Investing is like filling up the car with petrol, whereas insurance is like purchasing a first-aid kit and a puncture repair kit before embarking on a journey. And, we all know starting your journey without sufficient protection is not only risky but will turn out to be expensive if any contingency happens. 

Insurance or investment- Which one should you choose first?

While it is one’s personal decision whether to buy term insurance first or make an investment first, experts seem to believe that if you are new to your job or career, you should prioritise obtaining the insurance first. The rationale is simple: you can start investing whenever you have extra capital from your job. However, if your health condition prevents you from continuing to work, you will be unable to provide for your family, let alone invest any spare income. So, whether your financial strategy solely includes bank savings, mutual funds, or pension plans, there is one major hole you can fill by learning what is term insurance.

When you choose to buy term insurance first, your rational mind might say your savings and investments will provide high returns over the next 20 years or more. Yes, this could work, but have you considered the uncertainties of life? Without any protection, you are taking your life for granted, and this mistake might cost your family (if you die or are involved in a deadly accident). Furthermore, while your investments will take time to pay off, insurance protection will start off immediately after you buy term insurance. 

Given the risks associated with today’s lifestyle, it is prudent to obtain insurance that could protect you from them. When you learn what is term insurance, you will understand how it is a basic yet most effective insurance product considering the cost of the premium and the sum assured you are getting in return. 

Here are three reasons why you should think about getting a term insurance policy

Low premium amount: The most significant advantage of purchasing term life insurance early on is that the premium amount is substantially lower than what you would pay if you purchased it later in life.

For example, suppose you wish to buy a Rs 1 crore policy that covers you for 75 years. If you buy it at 25, the annual premium will be Rs 8,000. At thirty, it would be Rs Ten thousand. At 45, the premium for the same policy would be Rs. 30,000.

The premium remains the same throughout, so you pay less in total: A term insurance policy’s premium remains constant throughout its duration. As a result, if you purchase it at an early age, the premium will remain low throughout, which will help you save money in the long run. 

Assume you have a Rs 1 crore term insurance policy at the age of 25 that will cover you until the age of 75, for which you pay an annual premium of Rs 8,000. So you’d pay a total of Rs 4 lakh. However, if you purchase the same insurance at the age of 35, the premium will be Rs 15,000 each year. So the total sum you must pay over the years is Rs 6 lakh.

Your family gets insured early on: The sooner you buy term insurance, the sooner your family will be covered. Having term insurance assures that your family will not face financial difficulties if something happens to you. 

Here’s how you can allocate the money for insurance and investments.

Health Insurance: It is recommended that you get health insurance coverage equal to at least six times your monthly pay.

Term life insurance: If one doesn’t have a lot of responsibilities, a term cover of Rs. 1 crore is sufficient. A Rs 1 crore term policy will have an annual premium of around Rs 8,000.

Investments: With the remaining amount, you can invest in mutual funds.

Now, as your income improves, s/he should increase your investment amount.

Life is full of uncertainty, and hence, it is critical that we safeguard ourselves and our dependents from any potential financial troubles. Considering how inflation continues to climb, we must begin investing as soon as possible. Similarly, the right insurance coverage can safeguard us from financial losses caused by unforeseen circumstances. Those who cannot afford to do both must assess the advantages of each investment and insurance and make their decisions accordingly.


Investment and insurance play very different functions. No matter what stage of life one is at, it is advisable to keep investing and insurance separate. Both are distinct and vital in one’s financial plan. As a result, always set aside a portion of your earnings for investment and another for insurance. 

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