Everyone wants to create wealth as soon as they start earning, & that’s a good thought too. Wealth creation is a long term process & can’t be achieved without years of patience & regular investing.

Wealth is like a cliff we need to climb till we get retire, but what we don’t know is that we are the Cliffhanger hanging from that cliff. If we make right investment decisions, patiently & regularly, throughout our earning years, we will climb the cliff. But, if we don’t get the right investment decisions or there is interruption in income due to any reason, we fall. One wrong step or unpleasant surprise can shatter all the hopes of our family.

As soon as we start earning we come across many of the investment products, which create confusion in our mind what should I do? Lot’s of sales pitch in mass media in support of almost all of the investment products & the bigger problem is they sound logical too. Moreover, these marketed logics when mixed with free random & friendly advises makes the investors situation even worse.

The first question which comes to an investor’s mind is; Whether I should first buy a Life Insurance policy or I must first start Investing. What do you think?…. Here for me Insurance Policy means a Term Plan.

Wealth creation is everybody’s paramount desire & concern, because that’s what we have been conditioned to since our childhood. We are always told to create wealth for our future, but we are never told is “How to do that?”,  So we always focus on Investing over buying an Insurance policy.

If by any chance we buy insurance policy than we usually buy insurance investment plans, where we do not bother what is the sum assured. This may be fatal for our wealth creation process. Remember what I said earlier “Wealth creation is a long-term process & require patience & regular investing”. And for that we need to live & earn till we accumulate desired retirement corpus.

If we start investing before buying a Term plan, it shows that we have unconsciously assumed that nothing wrong will happen to the earning member of the family in the future. Though in some cases it doesn’t holds true. There may be a Death, Disease, or Disability, which in any case may hamper income generation for the family.

Insurance cover provide a big lumsum amount to the family, which when invested by the family may replace at least 80% of the current income of the family. This can only be possible through a Term Insurance Plan. Why & how much we should buy term insurance plan, we will discuss in our next post.

Suppose you have started doing long-term investments for the future of your family & something goes wrong to you. In the absence of a proper insurance cover, there is a high chance that your family will have to redeem investments in between, which are meant for the long term. All the projections of future value to be accumulated say after 20-25 years will disappear in a second.

Planning changes even if the income of a family is hampered for a few months; wherein, here we are talking about income lost may be forever. Every plan of the family member comes on hold, whether it’s child education or marriage or spouse’s retirement income plan. Its awful.

There is no doubt that wealth creation is most important aspect for each and everybody of us. But, we can only achieve that when we do provisioning for anything which is beyond our control. There is no doubt that Sachin Tendulkar was a great batsman and has accumulated lots of runs & records with time, but remember he has always played with the guards on.

I hope you must have understood the importance of optimum Insurance cover before beginning to start investments.

Do share your views if you think of anything which may add value to the write up or for clarification.