I am a 27-year-old man. I am married but do not have children. I earn Rs.8 lakh a year and we have a family income of Rs.15 lakh. I have three endowment policies with a total cover of Rs.35 lakh. Should I continue these?
—Srikanth Jain
Endowment policies are a combination of protection and investment. The protection offered in an endowment plan is generally more expensive than a normal term plan. Your total coverage is grossly inadequate. You should buy a term insurance plan of around Rs.80 lakh for yourself and another Rs.70 lakh for your spouse.
The effective yield on endowment policies is low, typically between 3% and 5% for traditional plans.
