From the course: Managing Your Personal Investments

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Insurance products investments

Insurance products investments

From the course: Managing Your Personal Investments

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Insurance products investments

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- In the world of investing, the basic building blocks are cash and equivalents, stocks, bonds, funds, and insurance. It seems the odd one out is insurance products, but bear with me. Insurance is much more than just what you buy to cover your car, house, or life. There are insurance products that have all the dimensions of an investment product, and should be considered as such. First, most types of insurance are an expense, not an investment. You pay a premium to get the insurance and often an excess if you use it. For example, you may pay $1,500 a year to insure your car, and if you get into an accident, you may have to pay the first $500 of costs, but the insurance company will pay the rest. It's pretty straightforward, right? The insurance company decides how risky you are to insure. And they do a whole lot of math, called underwriting, on how much you should pay. The essence of underwriting is the same with…

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