Key idea
Insurance is not an investment and was never meant to be. It is a trade: a small, certain cost today to remove a large, uncertain one tomorrow.
At its core, insurance is risk transfer. You pay a modest premium, and in return the insurer agrees to carry a financial loss that would be too heavy for you to bear alone. You are not trying to make money; you are buying certainty against a catastrophe.
The trade, in plain terms
Small
certain premium
Removes
a large, rare loss
Payout
only if the event happens
This is why a good insurance policy often pays you nothing for years, and that is a success, not a waste. You were buying protection, not returns. The premium is the price of not having to worry about the disaster.
The mistake to avoid
The single biggest error in Indian personal finance is treating insurance as a savings or investment product. Policies that promise to "return your money" almost always deliver poor protection and poor returns at once. Pure insurance is cheap precisely because it does one job well.
One recent point in your favour: since 22 September 2025, individual health and life insurance premiums are exempt from GST (down from 18%), so pure cover is cheaper than it used to be. Confirm current rules, as tax rates can change.
Finished reading?
Marking this complete counts today, and your streak becomes day 1.