There are well known methods to arrive at a ideal insurance cover for an indiviual.These further explains the significance of term insurance
Income Replacement Value
1. Age = 40
Annual Income = 5,00,000
Retirement Age = 60
Insurance Cover needed = (60-40) * 5,00,000 = 1 crore
Another variation, is to mutiply the income with a mutiplier to calculate your life cover.The multiplier differs across various age groups
20-30 years = 5-10 times annual income
30-40 years = 15-20 times annual income
40-50 years = 10-15 times annual income
50-60 years = 5-10 times annual income
So when you fit into any of this category and calculate your insurance cover it would be amounting to a significant sum.
When going for a typical endowment policy for such a insurance sum(eg 1 crore for 40 years old earning 5 lacs annually) , the premium would shoot to very high levels.
Term insurance 's cost benefit will be best exploited in these scenarios.
Always keep Insurance and Investment seperate.
What is term insurance?