What is Term Insurance
Imagine a world where you could potentially buy a product that could replace you. Okay, not you precisely, because that would be a bit silly. But what if you had a replica version of yourself that could earn like you and make money like you. Wouldn’t you jump on that opportunity? Or maybe pay an annual fee just so you could hold on to this person? You probably would. And a term insurance product does just that. It is your financial replica and it comes alive when you die.
Let me explain. When you buy a term insurance product, you pay a small fee every year to protect your downside. And in the event of your passing, the insurance company pays out a large sum of money to your family or your loved ones. Think — 1 Crore or 5 Crore or even 10 Crore. Ideally, this money should replace you financially. It should support your family when you’re no longer the breadwinner. And unless you’ve deliberately misled your insurer whilst buying the policy, they will pay out the full amount the moment you die. Hell, even if you do mislead them, they have 3 years to uncover the fraud. If they don’t do it by then, they are mandated to pay out, no questions asked. So unless you commit suicide within one year of buying the policy or you died while committing a crime, your loved ones will get this money.
And while the base product is simple enough to understand, some key questions still remain and we will address that in the next section.