We sometimes invest in insurance policies without knowing the benefits of the policy. There are various policies like children's education plans, health insurance policies, life insurance plans with huge death benefits, and accident insurance covers. We do not look at the insurance coverage we are receiving; at times we buy a policy only for an investment or tax saving purpose under section 80C.

There are some points to be considered while purchasing an insurance policy:

Insurance products are offered to basically provide protection. Like a term cover offers insurance protection to the dependents of the policyholder but no benefit in case the policyholder survives the term of the policy. But unit-linked insurance policy (ULIP) provides dual benefits of insurance protection and a flexible investment option. A certain part of the premium is invested in equities, debt funds and bonds. The rest is used to provide for life insurance and fund management costs. But if you want to invest to make profits it is advisable to in some mutual funds that help you give higher returns. Do not look at insurance as an investment tool.

You should calculate how your benefits will look after 10 or 20 years when investing in an insurance policy. Avoid insurance policies that do not have inflation protection. Since cost of living and medical costs are bound to increase up after 10 years owing to inflationary pressures, one should make sure that the policy you opt for has insurance protection or hedge.

Before purchasing your insurance policy always read the clauses and exclusions of the policy. Make sure what you are investing in is beneficial to you and your family.