Although it is not immediately obvious, insurance forms a critical part of your investment portfolio. It is not just important, it is necessary. Paying towards your insurance policy is a sacrifice done today to provide for needs in the future.

Insurance policies are typically long term. Premiums paid toward the insurance plan are however locked in at the outset itself. In effect, when you buy an insurance plan, you are saving for the long term paying today’s rates. Whatever the economic landscape might be, once you buy an insurance plan at a particular premium rate, you are set. The premium doesn’t change according to market markers or anything else.

Insurance has two major components – savings and mortality benefit – that make it a unique part of any investment portfolio. The savings component is the long-term gain where you typically get a pay off at the end of the term. The mortality component is the protector of your earning capacity i.e. it pays out the entire sum assured if you die during the term of the policy, compensating for the loss of income suffered by your family due to your demise.