Suze Orman Says: Insurance is insurance; Investment is investment

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This is one of the statement Suze Orman made that made me really think: Insurance is insurance; investment is investment.

Differentiating Insurance from Investment

source: http://lerablog.org

This is the fifth installment about the interview of Suze Orman made by Karen Davila of ANC. If you haven’t read the previous four below are the links so please go check them out.

Suze Orman says: It is not that Pinoys can’t save, they don’t want to save

Suze Orman Says: The First Law of Money

Suze Orman Says: Check Your Latte Expenses

Suze Orman Says: 8 Months of Emergency Fund

One of the question raised during the interview is about insurance. According to Suze Orman you need to get insurance if someone depends on you financially. At the same time you need health insurance specially when your employer does not cover you so that you secure yourself from expensive medical needs that may arise.

Suze clarified that insurance is different from investment because insurance agents always approach you saying insurance is a good investment. The point is insurance serves a different purpose as compared to investment thus it is not considered as an investment. Insurance is a safety net for the unexpected which your emergency fund might not be able to cover.

You need to get insurance to support those people who are financially dependent to you to cover their needs when you unfortunately passed away ahead of time. Your kids, or mom, or anyone who are currently dependent to you might be greatly affected upon your demise thus ensuring that their needs are met until they are able or someone will take them.

As a rule get insurance for your car, health, and business. These insurances are necessary in case unexpected things happen. On the other hand only get life insurance when someone is actually dependent to you. Again insurance agents will tell you that it is a good investment but always consider first the type of insurance and the people dependent on you before signing that policy because it might not be cost efficient and you could have earned more if you put such money to your investment.

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About the blogger

Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Check him out in Google+ Learn more about Louis and his financial freedom advocacy here.

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2 comments for “Suze Orman Says: Insurance is insurance; Investment is investment

  1. July 18, 2013 at 5:29 pm

    Interesting blog. You explained this topic well and I enjoyed reading it. I like some points that you said. As you mentioned above, “.. insurance agents will tell you that it is a good investment but always consider first the type of insurance and the people dependent on you before signing that policy because it might not be cost efficient and you could have earned more if you put such money to your investment.” Thanks for sharing such an important topic.

    ~cody

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