How the fear of early death drove this Mumbai woman to buy ₹10 crore term cover

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₹6.7 lakh annual premium. "I have a family history of people dying early. This made me seek a high life cover policy so that I can protect my daughter financially while I am living," she says.

Since real estate is an illiquid asset, IIM decided to focus on her other financial assets. Ambavane of IMM looked into her FD portfolio and calculated the XIRR on a post-tax basis for ongoing FDs having different maturities and interest rates. "It came in at 4%.

We decided to close some of FDs to deploy the money in equity and hybrid mutual funds," says Ambavane. Mehta had identified a few goals for herself such as Kamya's education, purchasing a vehicle, home renovation, post-retirement household expenses and a vacation fund. "We recommended that she add a couple of additional goals such as creating an emergency corpus, vehicle loan foreclosure and a medical corpus for herself," Ambavane says.

So far as life insurance is concerned, she did not need such a high term cover. "We recommend life cover only to the extent of total corpus needed to achieve the financial goals. Even if her existing investments grow at the rate of 8%, it would be sorted.

However, one cannot ignore psychological needs. We told her to bring the term cover down to ₹4 crore for which she now pays ₹1.6 lakh annual premium," Ambavane says. Mehta also had a couple of old endowment policies in which the life cover was minimal.

"Since most of the premiums for these had already been paid and the remaining premiums were a small part of her net-worth, we recommended that she continue with those policies," she says. Mehta also needed a source of regular income if she were to stop working. "We recommended buying a guaranteed income plan in which regular income would