Is your insurance policy a true financial asset or just an illusion of security? In this insightful episode of Make Money, financial expert Alfred Mathu explores whether insurance can genuinely serve as an investment vehicle. He breaks down the complexities of insurance products and highlights why many people end up with policies they don’t fully understand. Hosted by Kepha Muiruri and brought to you by Business Daily Africa, this episode equips you with the knowledge to make smarter financial choices in Kenya.
The Truth About Insurance as an Investment
Not all insurance policies are created equal. While some include investment components (like whole life or endowment plans), they often come with high fees and low returns compared to standalone investments. Mathu encourages consumers to ask hard questions: Are you better off buying term insurance for protection and investing the difference elsewhere?
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FAQ’s
Can insurance really be considered an investment?
Some insurance products, like whole-life or endowment policies, have investment components. However, they often offer lower returns compared to traditional investment options. It’s crucial to understand the primary purpose of the policy before treating it as an investment.
Why is insurance said to be ”sold” rather than ”bought”?
Insurance is often marketed aggressively, with clients purchasing policies based on persuasion rather than personal financial planning. This can lead to policies that don’t align with long-term goals.
What’sWhat’s the difference between term insurance and investment-linked insurance?
Term insurance provides pure life coverage for a fixed period without any payout if you survive the term. Investment-linked insurance combines life coverage with an investment component, which grows based on market performance.
Is it better to separate insurance from investments?
Many financial experts recommend keeping insurance and investments separate—buy term insurance for protection and invest the difference in high-return assets like mutual funds or bonds.
How do I evaluate if my insurance policy is worth it?
Review the policy’s benefits, costs, returns (if any), and how well it aligns with your financial objectives. A qualified financial advisor can help assess whether your insurance is adding value or just consuming your income.
Conclusion
Understanding whether insurance is a true investment or just an illusion is crucial to making smart financial choices. As Alfred Mathu explains, many policies are marketed as wealth-builders but may fall short of that promise. The Make Money podcast by Kepha Muiruri offers valuable insights to help you navigate these decisions and more. From bonds to Saccos and investing myths to money goals, each episode equips you with practical tools to build wealth and secure your financial future in Kenya.
