How to know If you have the wrong insurance

Source: ET Wealth: 14 March 2011

 

1. Low Cover

A policy should give you a life cover of at least 40 times the annual premium. If it does not, you are paying too much for the cover

 

2. High Premium

You need a cover of at least 5 times your annual income. The premium for this cover should not account for more than 6-8% of your annual income.

 

3. Tenure

Insurance should cover a person for his entire working life.

 

4. Return Projections:

An endowment policy appears attractive because of the projected corpus on the maturity of the plan. But one must factor inflation into the calculation. In 25 years, a moderate 5% inflation will reduce the value of 20Lakh to a mere 5.5 lakh.