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How term insurance works ?

Shailesh Kumar, Co-founder, Insurance Samadhan

Answered on May 05,2022

It is very simple . Let us say that we have a pool of 100 people and each one of us have a mobile of Rs 10000 .

On the basis of past 10 years , we know that 3 mobiles are lost each year :

So total loss : Rs 30000

Now we have two options that loser bears the loss or the pool bears the loss .

Pool decide to bear the loss by collecting Rs 300 from each member so they collect Rs 30000 which is used to compensate looser ,

Let us say this pool has 10 lakh members then They will need a manager to collect extra money and compensate looser so they increase fees from Rs 300 to Rs 400 where Rs 100 goes to the Manager or Insurance Company to manage such large group .