Why do you see ₹10k SIP vs ₹10k Insurance Premium Differently?

y2jmoneytree
Feb 10
3 min read

The Psychology of the Wallet

It is the 5th of the month. You receive an SMS: “Acct XX123 debited for ₹10,000 towards Mutual Fund SIP.” You smile. You feel responsible. You mentally calculate how much this will grow to in 15 years.

Two days later, another reminder pops up: “Term Insurance Premium Due: ₹10,000.”

You sigh. You delay it. You wonder, “Is this really necessary? That money is just going down the drain if I don’t die.”

“My does the same amount of money invoke such different emotions?”

This isn’t a math problem. It’s a mindset problem. In India, we are culturally wired to ask, "Isme return kya milega?" What return will I get?

Today, let’s decode why we treat Wealth Creation (SIP) and Wealth Protection (Insurance) differently, and why fixing this mindset is crucial for your financial survival.

The "Batting vs. Padding"

Let’s talk cricket - our second religion. Imagine you are the captain of your financial team.

Your SIPs are your Star Batsmen: They are aggressive. They hit fours and sixes. They build the score (Wealth) over time.
Your Insurance is the Helmet, Pads, and Guard: They don’t score runs. They feel heavy. They cost money.

Now, ask yourself: Would you send out even your #1 batsman to face a fast bowler without a helmet just to save the cost of the non-scoring equipment? Of course not!! The helmet ensures the batsman survives the bouncers so he can continue scoring. Similarly, Insurance ensures your finances survive life’s bouncers (illness, accidents, death) so your SIPs can keep compounding.

The "Sunk Cost" Fallacy

The biggest mental block Indian investors face with pure Term Insurance or Health Insurance is that there is no maturity benefit. It feels like an expensewithout any money coming back.

The SIP Mindset: "I am planting a seed to eat the fruit later." (Investment)
The Insurance Mindset: "I am paying a fine for a crime I haven't committed." (Expense)

Reframe the Narrative:

You are not paying for a product; you are paying for the Risk Transfer. For a premium of ₹15,000, an insurance company agrees to take a risk of ₹1 Crore off your shoulders. If nothing happens to you, you didn't "waste" money. You paid a small fee to live stress-free for 365 days. That is a service, not a loss.

Why Brain Still Rejects Insurance?

Even after understanding roles, emotionally, we still prefer SIP. Here’s why:

3.1 Visibility Bias

SIP: You see apps, charts, green arrows
Insurance: You only see a debit from bank once a year/month

We value what we can see and measure.

3.2 Loss Aversion

Behaviourally, people hate the idea of “losing” money:

“If I live long and healthy, I lose all the premium amounts!”

But think of it this way:

If your house doesn’t catch fire, do you call fire insurance a waste?
If you never claim health insurance, is it a bad product?

No. Because their job is to protect against low-probability, high-impact disasters.

3.3 Past Mis-Selling

Many Indians were sold:

High-premium traditional plans with low returns
ULIPs are marketed as “best of investment + insurance + save taxes” with high costs

Experience was poor, so now the word “insurance” itself feels negative, especially if you compare it to clean mutual fund SIPs. The solution is not to avoid insurance, but to choose the right type.

Clearing the Confusion

"Should I buy ULIPs or Endowment plans to get returns on my insurance?"

Generally, No. Don't mix insurance and investment. They usually offer lower returns than SIPs and lower coverage than Term Plans. Keep them separate for maximum efficiency.

Conclusion: Loving Them Both

It is time to stop looking at your Insurance Premium as the villain of your bank statement.

SIP takes care of your Future Self
Insurance takes care of your Current Self

You cannot have a secure future if your present is at risk. As you plan your next SIP step-up, take a moment to review your insurance coverage and tell yourself how "sensible" you are with that one decision! Once you see this ladder, 10k insurance premium stops looking like a “waste” and starts looking like: