How is insurance defined in layman terms?
Insurance is protection against financial loss arising on the happening of an eventuality. In life insurance parlance, the event happens to be the death of an individual. To begin with, there are two basic types of plans; endowment plans and term plans. All other plans are actually variations derived from these two. In an endowment plan, the premium paid covers a savings element that is invested in different investment instruments to generate returns in the long-term. A term plan, being a pure risk cover plan, only administration expenses and mortality charges are covered in the premium. There is no savings element in the premium being charged to the insured; as a result the insured does not receive anything should he survive the entire term. So why are we advocating term plans? The reasons are very clear. A term plan offers the insured a higher sum assured at a very low cost. And this is the fundamental principle of insurance. But in India, history suggests that insurance has always b
