Every year, millions of Indians buy life insurance policies to save tax. These policies neither give good returns, nor offer adequate cover to the policyholder. They eventually become millstones around the necks of the buyers, preventing them from investing for other financial goals.  Insurance suffer a bigger loss if he continues to pour money into these low-yield policies.

Not many insurance buyers understand this. Most don't even understand the features and benefits of the policies they have bought. The tax deduction is the paramount concern. Experts say insurance policies are the worst instrument among all tax -saving options. A 20-year plan will barely offer 6% returns to the buyer. This will not even beat inflation.

The only insurance policy worth buying is a pure protection term plan. These plans only cover the risk of death and do not have a maturity value. As a result, these plans have very low premiums. A 30 year old non-smoker can buy a life cover of `1 crore for as little as `7,500 a year. Buy a term plan this year.