Regaring Tax Saving – Investment vs Insurance

POSTED BY Raghavendra ON November 5, 2013 5:07 pm COMMENTS (4)


I’m a IT professional aged 25 and living in Chennai. I’m finding difficulties in my financial planning doing investments. My only investment is an LIC policy which I took couple of years back for Rs. 3,00,000. So I’m paying around 20k anually which is the only component (apart from medical insurance – 80D) which I show under 80C.

I’m hearing three type of financial components-

1. Pure Insurance

2. Pure Investment

3. Investment + Insurance

My findings – 

1. I’ve heard my friends that telling that my LIC coverage is very less. The more amount you invest in this as early possible is more beneficial.

2. Mutual Funds require atleast 5 years to earn you good returns.

3. All types of investments involve risk.

My concerns – 

1. Reducing tax component and put it in short term investments

2. Also not to miss the de-facto long term investments that have to be made (like LIC).

I’m completely new to all these and seek your guidance to plan my financial properly.



4 replies on this article “Regaring Tax Saving – Investment vs Insurance”

  1. ashalanshu says:

    Dear Raghav, how about reading this discussion?

    jagoinvestor. com/forum/finacial-planning-faqs



  2. nlvraghavendra says:

    Thank you Ashish and Manish. I believe I need to get familiarized more and more with Financial Planning so that I get to know more about the avenues I can invest in. I never heard about Pure Term Insurance until now. I understood the difference between pure term and whole life insurance. Thanks for your feedback again.

  3. Hi Raghav

    I can see that you are in the typical mindset and situation as most of the indians are when they start . You were sold LIC policy or you bought it yourself to save tax. Now you have some money in it and now you cant get out of it because of sunk cost fallacy theory ! (I will loose what I have put) .

    Now you have to think like this

    1. Who is financially dependent on you and for how much money ? If you die , how much money will be required by your loved one’s ? Is it Rs 3 lacs for which you are covered ? how long will it last ? I am sure you would need at-least 50 lacs – correct ?

    Take a pure term plan for this purpose and you will pay around 4-5k per YEAR !

    2. Then you have to look at long term wealth creation thereafter , and you should choose options like SIP in mutual funds / PPF incase you are conservative . I hope you got some pointers from here ..

    If you have more doubts – please revert back !


  4. Ashish Garg says:

    Hi Raghav,

    Suggest you go through various questions asked here to understand the basics of financial planning. This shall give you enough information to look at various avenues of investments / savings etc.

    Just to start with, I suggest you insure yourself to the correct extent using a good online term plan (with any insurance provider you are comfortable with). Correct insurance amount would be about 12-15 times of your annual salary and keep on adding to it every few years so that you are not under insured. You said you have a medical insurance, see if it good enough to cover for future medical expenses as well.

    Generate an emergency fund equivalent to about 6 months of your expenses / salary.

    Once you do that approach for next step – investments


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