Which is better banking or insurance? | Mike Butean

Updated: Mar 17

In this article, I will talk about which is better banking or insurance

What is the difference between Banks and Insurance companies?

Both banks and insurance companies are financial institutions, but they don’t have as much in common as you might think. Although they do have some similarities, their operations are based on different models that lead to some notable contrasts between them. Both banks and insurance companies are financial intermediaries. However, their functions are different. An insurance company ensures its customers against certain risks, such as the risk of having a car accident or the risk that a house catches on fire or life expectancy. In return for this insurance, their customers pay them regular insurance premiums.

What are the key differences?

Banks accept short-term deposits and make long-term loans. This means that there is a mismatch between their liabilities and their assets. In case a large number of their depositors want their money back, they might have to come up with the money in a hurry. For an insurance company, however, its liabilities are based on certain insured events happening. Their customers can get a payout if the event they are insured against, such as their house burning down, does happen. They don’t have a claim on the insurance company otherwise.

Which is better banking or insurance?

A banker is a fellow who lends you his umbrella when the sun is shining but wants it back the minute it begins to rain.-Mark Twain.

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