'Underwriters Thumb Rule

Another one known as 'Underwriters Thumb Rule' under which life insurance should be multiple of annual income depending on the age. For instance, a person with in the age group of 20 to 30 years should have a life insurance cover which is worth more than his annual income and a person above 55 years with more than 6 times, respectively.

After you have recognized how much life insurance cover you need, it’s very important to evaluate your needs. By analyzing your needs rightly, you will be able to choose the right insurance product. "Typically you would have any/all of the following needs - protection, wealth accumulation, wealth maintenance, and retirement," says Relan.

Other Alternatives

However, protection need include protection against death, disability and dreaded diseases. Insurance premiums like critical illness, waiver of premium (WOP) or accidental death benefit (ADB) are meant for these cases. And, on the other hand, Wealth needs include saving for children's education, marriage and/or getting them settled. This also includes savings for the retirement. Financial instruments like endowment, money back and whole life plans would come under this category.

Also Read:

Home, Car Loan Borrowers Can Now Take A Breathe

11 Expensive Currencies Stronger Than U.S. Dollar