Some years back Insurance was bought primarily as a saving and to lower the tax burden. Even today people buy Life Insurance for the purpose of saving tax without understanding the logic of Insurance. The proof lies in the fact that maximum number of policies are sold between December and March just before the financial year end. Just because buying Life Insurance lowers your tax burden it is understood by the most people that it is the best form of Investment. But the basic logic of Life Insurance is to provide security to your family from an unfortunate event.

Life Insurance serves the following basic purposes:

• Providing Financial Security to your Family in case of an unfortunate event
• Inculcate the habit of saving for the future
• Important tool for wealth transfer

There are a lot of Insurance Policies offered by insurance companies with provide Life Insurance Cover as well as the benefits of Mutual fund Investments. It is good for people who do not have time to focus on Investment products. ULIP (Unit Linked Insurance Plans) plans are the most common form of these kind schemes.You get units just like in a mutual fund. A part of premium goes to provide an insurance cover (mortality charge) and the rest is invested like in a mutual fund. You should look at ULIP schemes which have lower fund management cost, lower mortality charges, lower administrative charges and also the returns given by the insurance company in the past.

It is always better to avoid mixing your Insurance with Investments. Insurance should be bought for protecting your financial future and on the other hand, Investments should be done for creating wealth for the future.