Insurance, as the name suggests,
provides assurance of payment of a fixed sum of money in the event of
unexpected loss against payment of a predictable sum of money, known as
premium. It is a tool to hedge against the risk of contingency. Thus, it
transfers all the risk from the insured to the insurer or insurance company for
a certain fee. An insurance policy allows individuals, businesses and other
entities to protect themselves against potential losses and financial adversity
in exchange of a reasonable premium.
Insurance is something that everyone
will need at some point of their lives. This includes life insurance, motor
insurance, health insurance, travel insurance, home insurance, etc. Here in
this article, we highlight one of the
simplest and cheapest forms of life insurance, known as Term Insurance.
Term insurance is the purest form
of insurance. The policy will be in force for a particular term (say 30 years
or up to the age of 75) and then comes to an end. During the time the term policy
is in force, the insured pays a fixed premium to the insurance company at
regular intervals. This is called premium, and if during this time if the
insured dies, the insurance company pays a guaranteed amount of money, known as
sum assured, to the family of the insured. In case the insured survives the
period of insurance, the policy terminates and nothing is payable to the
insured. All the premiums paid till date go to the insurance company. Hence
term insurance products offer only risk cover without any returns or any
maturity value. These policies are relatively much cheaper when compared to
traditional insurance products and cater to the specific needs of an
individual, i.e., to cover the risk of death. Term insurance plan is provided
by almost all life insurers.
Why Term Insurance: When an individual starts
earning, he is expected to earn till the time he retires and his family is
dependent on his income. With his recurring income and his savings, he fulfills
his various financial goals. However, life is uncertain and an unfortunate
event such as death or permanent disability can cease his capacity to earn.
Hence every individual is required to protect his family against any
unfortunate attached to his life so that his family continues to enjoy the same
standard of living even if he is not alive.
