Insurance before investment
Insurance isn't an investment. It's the wall that keeps one bad event from destroying everything else you're building.
Term life insurance
If anyone depends on your income, you need term insurance: a policy that pays a lump sum to your family if you die during the term, and nothing otherwise. Because it has no savings component, it's very cheap: a healthy 30-year-old can often buy ₹1 crore of cover for around ₹10,000 to ₹15,000 a year.
A common guideline is cover of 10 to 15 times your annual income, plus outstanding loans, minus existing investments. Buy it until the age your dependants would be self-sufficient, typically 60 to 65.
Build from the bottom up: each layer protects the ones above.
Health insurance
A single hospital stay in a private city hospital can cost several lakh rupees. A family floater policy of ₹10 lakh or more is sensible in most cities, with a super top-up for extra protection at low cost. Don't rely only on your employer's group cover; it ends when your job does.
What to avoid
Endowment, money-back and many ULIP policies mix insurance with investment. The result is usually too little cover and a low return, often 4 to 6% a year. Keep insurance and investment separate: buy term and health cover, then invest the difference.
Key takeaways
- 1Buy term cover of 10–15× income if anyone depends on you.
- 2Get family health cover independent of your employer.
- 3Keep insurance and investment separate.
Finish this lesson
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Educational content, not investment advice. Figures are illustrative.