It is good planning to separate insurance from investments

Dubai: One of the questions that people ask is whether life insurance plans will provide better returns on their capital compared to investing directly in stocks or other money-making schemes.

Life insurance and investment strategies should be kept separate when considering personal financial requirements, said Phil Ashkuri, UAE head of insurance for HSBC. However, he noted that there is still a wide range of products that provide excellent savings and investment vehicles that can be wrapped or covered with a life policy.

Any insurance product with an investment component, therefore, is best taken up with a finance professional. "It is very important to get professional and independent financial advice, tailored to your individual needs, when considering this type of product," Ashkuri said.

Shailesh Dash, chairman of Al Masah Capital, said life insurance basically protects one's family from any uncertain events, and should not be taken as a money-making scheme. "It is better to invest your money somewhere else where you can make higher returns," he said.

Better off

Another banker, who did not wish to be named, is quite categorical about people being better off investing their money separately than mixing life insurance and investments.

"It is not cost-effective. If you mix insurance and investment, you go through a middleman, so you have to pay numerous charges, fees and commissions. But if you take mutual funds, for example, your money will go directly to your investment. The insurance route is more costly," he said.

At one insurance company in Dubai, life insurance plans that promise high returns by investing premiums in share markets and securities require policy administration charges $6.50 (Dh23.85) per month in fund management charges, 2.5 per cent per year mortality charges and miscellaneous fees.

The unnamed banker pointed out that it is still important to get a life insurance plan, especially when there are debts or mortgages to pay and dependents to think about. "But the insurance benefit is not for you, it is for your loved ones to fall back on when you're not there to support them anymore. If you want money for yourself, invest separately," he added.