Insurance as the name suggests
provide assurance of payment of fixed sum of money in the event of unexpected
loss against payment of some predictable sum of money called as premium. It is
tool to hedge against the risk of contingency. Thus it transfers all the risk
from the insured to the insurer or the insurance company for a certain fee.
Hence, insurance policy allows individuals, businesses and other entities to
protect themselves against potential losses and financial adversity in exchange
of a reasonable premium.
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.
Term insurance allows individual
to take huge sum assured with small premium. For example: a 30-year-old man who
wants to get his life insured for Rs.1 crore has to shell out only Rs.7,000 to
Rs.8,000 every year to protect himself for next 30 years.
