Know the difference between Investments & Insurance.
Insurance is meant for protection same like car,home insurance focus is not return generation/grow money as your investments.Are we taking car insurance to get back money of what we paid or protecting us in case of money required to fix the damages?
Most of the products (endowment ,money back etc)from life insurance companies are hybrid ,they sell as investment and protection policies . The normal bench mark is if you pay for 15-20 years then you will approx 2 times of what you paid as maturity benefit (including revolutionary , additional, loyalty bonuses etc) and if you die in between sum insured(mostly planned premium payments) will be paid back to nominee.
First,The returns from these policies range in 4-5% for 15-20 years policy. Does it make sense even today when FD rates are around 5-6%?I will leave it to you to all.
Second, Sum Assured on Death is defined as higher of 125% of Basic Sum Assured or 10 times of annualised premium. This death benefit shall not be less than 105% of all the premiums paid as on date of death.For an example 50,000 yearly premium payment policy for 15-20 years, you might be getting approx 6,00,000 as death benefit. Please think whether the family can survive on this alone for next decades in the absence of the bread winner.
So,now we now what is insurance. Next question - how much ideally one can spend on life insurance for protection? Ideally it should not be more than 5% of your yearly take home income.If you are spending more,time to rethink whether you are doing as insurance or investment.