Term insurance is targeted at 10 times your annual income

I am a 31 year old teacher, single and earning 53,890 per month. I put down 36,500 per year in the general provident fund (GPF) and public provident fund (PPF). I started investing 10,000 per month in the direct growth option of the UTI Clever Index Fund Plan. My goal is to retire in 2050. Am I on the right track?

In addition, I am repaying an EMI home loan of 15,089 per month and an EMI personal loan of 15,064 per month. I have a Jeevan labh LIC policy with a quarterly premium of 11,822. I have an SBI LIFE-Smart Wealth Builder policy with an annual premium of 40,000 and an SBI LIFE-smart shield policy with an annual premium of 3,899.

Meanwhile, Aegon rejected my 1 crore term insurance online on the grounds that my income is not eligible to get a 1 crore coverage. How to solve this problem ? Also, I’m getting married this year. What investment strategy should I adopt to meet my wedding expenses, my future childbirth expenses and the education of the children?

—Laltu Panja

Your annual savings in the general provident fund (GPF), public provident fund (PPF), and monthly investment in mutual insurance is 1.56 lakh. This, if saved for 29 years until you retire in 2050, will help you accumulate 45 million. And at an average rate of return of 9% (a large portion of this portfolio is made up of fixed income securities), the value of the portfolio will become 2.2 crore. You’re on the right track, but you need to steadily increase your savings as your income increases.

At the same time, you should plan to repay the personal loan sooner as it has a very high borrowing cost.

Term insurance is generally an annual income factor and targets 10 times your annual income. This could be the reason it is denied because you are asking for something more than 15 times your annual income. At the same time, you should opt for term insurance when you have dependents. What is more important for you is to have health insurance in case you are not already covered.

Additionally, to meet your short-term expenses, you may consider saving in recurring bank deposits, very short-term debt funds to support said expenses.

Surya Bhatia is Managing Partner of Asset Managers.

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