When you think of investing and insurance, you may not believe there’s much correlation between the two. However, insurance and investing go hand-in-hand. In fact, most financial advisors would tell you that having enough insurance is as important as having a diverse investment portfolio.
Being financially literate means understanding investing strategy and the ins and outs of the insurance industry. Learning how to use both of those financial tools to your advantage is the best way to grow and secure your wealth. Continue reading to learn some of the correlations between insurance and investing.
Both Industries Provide Advisory Services For Consumers
Investing is all about using money as a seed—in other words, you plant your money in the stock market in hopes that your seed will grow and flourish. The principle of investing is easy to understand, but making investment decisions doesn’t come so easily. That’s why most investors choose to work with a broker or financial advisor to help them reach their investing goals.
Robo-advisors are virtual financial advisors that can give financial advice with little to no aid from a human advisor. Robo technology uses algorithms and data to come up with investment strategies based on data and mathematics. According to Wealth Rocket, WealthSimple is the best Robo advisor in Canada.
The insurance industry also has its own version of advisors. Finding the right insurance policies for your specific needs can be as difficult as finding the right stock to invest in. That’s why there are companies that specialize in helping consumers to find insurance policies that fit their specific needs and budget.
What WealthSimple is to the investing game, Insurance Tales is to the insurance industry. For years, they’ve been helping people find the right insurance companies and coverages while saving them money.
Both Industries Deal In Risk Management
One of the most striking similarities between the insurance industry and investing is that both have to measure and mitigate risk to remain profitable. When you go to an insurance company to purchase a policy, the first thing they do is look at the value of the item you’re trying to insure and the risk of insuring you. If you’ve exhibited what they deem risky behavior, you’ll end up paying higher insurance rates or may even be denied a policy.
The most important thing to know about investing is that there are no sure bets—there’s always risk involved. That’s why when you speak with a financial advisor or portfolio manager about an investment option, they’ll ask you questions to determine your risk tolerance. If you have a low risk tolerance, they’ll try to find investment opportunities with a relatively small minimum investment requirement. As you can see, risk plays an integral role in investing and the insurance industry.
Insurance Is An Investment
Not only are there numerous similarities between investing and insurance, but insurance is a type of investment. In fact, it’s an investment in your wealth because it protects it from worst-case scenarios.
For instance, if your house, which is likely your largest investment, is destroyed in a fire or flood, your insurance policy keeps you from having to bear the brunt of the financial loss. Whether you choose to relocate or rebuild, your insurance policy will be there to help you carry that financial load. So, as you can see, investing is a great way to increase your personal capital, but insurance is what protects it.
Both investing and insurance are necessary to realizing your financial potential. Investing builds wealth while insurance protects it. If you have lofty financial goals, you must have an investment strategy to increase your holdings and insurance to protect your financial assets in case the worst happens. Now, that’s what you call one hand washing the other.