Question

What are the similarities and differences between retirement needs and insurance?

Answer 1

Similarities:

Event Based:

Both Insurance and retirement needs are Event Based. As name suggested retirement needs arise when an event occurs i.e superannuation or retirement. Insurance indemnifies an individual on the happening of the events viz. accident, death, natural calamities etc.

Related to Livelihood:

Retirement needs and insurance are highly related to livelihood of an individual. Both focuses on the substituting the source of income when that particular source ceases to exist.

Individual Focused:

Every family depends on the income of its breadwinner. Both retirement needs and insurance focus on such individual. If something happens to individual retirement or death or accident ,family’s financial needs are to be catered.

Stimulate Savings:

Both retirement needs and insurance induce individuals to set apart part of their income as savings. Thereby both enhance real income of an individual even though they have lesser nominal income.

Future Oriented:

Both are concerned with the future needs caused by certain events. Individual’s concern on future helps to devise suitable financial plan to satisfy his family’s needs in future.

Financial Security:

Financial security can always be major aim of any retirement or insurance plan.

Differences:

Retirement Needs	Insurance
Retirement needs are concerned only with single event.	Insurance is a broader term which includes not only retirement and also covers other events too viz.accident,death, natural calamities,child education etc.
Retirement needs can be catered without any plan or agreement with third party. An individual can make savings even without involving a third party.	But for insurance, involvement of third party(i.e insurer) is inevitable)
They focus on the human beings only.	Both human beings and non living things can be insured.For Exmaple Building,Goods,Vehicle Etc
Time of happening of retirement is certain.An individual on attaining particular age will be supposed to retire	Time of happening of the events are uncertain.We cannot predict the timing of occurrence of death,natural calamities,theft etc.