Home » Working Women » Money Planning » Life Insurance A life cover is a must. But how much should you insure yourself for, to take care of your family's needs if you were to die tomorrow? The simplest way to do this is by finding out how much of your salary you spend on your family.

Then, imagine putting away that big a sum of money in a fixed deposit at the current rate of interest to yield the amount you now spend on your family.

For instance, if you spend Rs.9, 000 on your family every month, you have to invest Rs.10 lakhs in a fixed deposit at 11 per cent per annum, for your family to get Rs.9, 000 every month. So if you want to continue to get Rs.9, 000 per month, you must insure yourself for Rs.10 lakhs.

This is of course presuming that the cost of living 25 years hence will be the same. If you think that you would need more, then you must insure yourself for even more.

Term plans. These are pure risk covers. That is, if you survive the term of the policy, you will at best be refunded the premium - no bonus and additions. If you die during the policy term, your nominee gets the insured amount.

These plans are the cheapest and the most cost-effective, since they don't give you any 'returns' at the end of the term.

Whole life plans. Whole life plans come with a longer premium-paying term. Typically, you pay premium till you are 80 years old or for a span of 40 years. They also offer features like a limited premium paying term, convertible plans and with or without bonus benefits. But note: these plans will not give you any money during your lifetime; only your nominee gets the insured amount with bonus on your death. These plans are not so costly, because of the longer premium paying term.

Endowment plans. The costliest and the most popular amongst all are the Endowment plans. Unlike whole life and term plans, endowment policies give you the insured sum with bonus (if it is not a without- profit plan) if you survive the policy term. If you die during the term, your nominee gets the insured sum along with bonus.

Among the various endowment plans is the money-back plan where you get a certain percentage of the insured amount at regular intervals during the term. For example, if you have opted for a policy for 25 years, then you will get some money in the 10th year, some more money in the 15th year and the 20th year. Finally, the balance with bonus will be given to you at the end of the 25th year.