Planning to buy term insurance for your loved ones? Know all the pros and cons of such policies before putting your money into them. Term insurance is one of the best insurance products you can fall back upon in times of need and distress. However, like any other form of insurance, term insurance too has its set of pros and cons, which are worth considering before buying the plan for either yourself or your loved ones. Here we discuss in detail the advantages and disadvantages of insurance for a life-term to help you make an informed decision.
Meaning of Term Insurance
Before we delve any further, let us take a quick look at the meaning of term insurance. It is essentially the most basic life insurance product that works by offering a huge life cover to the insured. Life cover refers to the total amount of sum assured. A term insurance plan generally offers life cover at a very reasonably affordable premium to the policyholder with the objective to ensure that insurance is made available to every person.
This is because term insurance is a very vital component of financial planning for the future. It makes sure that in the unfortunate event of death of the policyholder, their respective family is well taken care of through the financial protection guaranteed by term insurance. In other words, a monetary benefit is given by the insurance company to the beneficiary/nominee of the insured in case of the latter’s death.
Since term insurance is issued for a specific time period, it only makes sense then that for the financial benefit to be handed out to the nominee, the death of the insured must have happened during the term of the policy. The specific policy term is stated in the term insurance plan.
Pros and Cons of Insurance
As stated earlier, every insurance product comes with a set of pros and cons which must be taken into consideration before buying a plan. For instance, life insurance being one of the most important insurance products, also has certain drawbacks. Just like the disadvantages of life insurance, there are disadvantages of health insurance and other types of insurance plans.
Pros of Term Insurance
There are several reasons why term insurance plans are one of the best choices to invest in for a lifetime:
- Term insurance policy allows you the flexibility to choose the exact time when you can pay the premium amount to the insurer towards the maintenance of the plan. This means that you can choose from a wide array of options – monthly, quarterly, or yearly – as per their budget.
- Term insurance is also one of the cheapest life insurance plans. This is because term insurance plans do not offer an investment choice to the investor. Hence, the premium to be paid for the plan is quite easily affordable to a common man.
- There are several rider options to choose from after buying term insurance. These rider benefits help enhance the coverage protection of the plan for the insured. A few examples include critical illness over, accidental death benefit, and the like.
- Term insurance also allows the policyholder to decide how the sum assured amount would be transferred to the beneficiary in case of the death of the insured. Now this amount can be paid either as a lump sum or in several installments, as per the comfort of the beneficiary or nominee.
- Term insurance offers tax deduction benefit under Section 80C of the Income Tax Act, 1961. A deduction of up to Rs. 1.5 lakh is permissible under the Act on the premium payable towards the plan. Moreover, the sum assured under term insurance is also entitled to enjoy tax benefits if it is 10 times the premium payable. This benefit is promised under Section 10(D)D.
Cons of Term Insurance Plans
Just like a term insurance policy has several benefits to offer, there are a couple of disadvantages of buying term insurance for your loved ones:
- Unlike a lot of other insurance products that offer maturity benefits like bonus to the policyholder upon the completion of policy term, no such benefits are provided in case of term insurance. This is because term insurance is a pure life insurance product; hence, no investment can be considered under term insurance.
- Another drawback of a term insurance plan is that the rate of premium payable under the plan varies with the age of the policyholder. This means that the younger you are, the lower the premium to be paid, and the older you get, the higher the amount of premium payable towards the plan.
- The varying surrender value of the plan is yet another of the disadvantages of term insurance. In case the policyholder wishes to discontinue the policy before the expiry of its full term, they can do so by putting a stop to the premium payable towards the plan. However, in such a case, the surrender value offered by the insurance company might differ between insurers. Also, some insurers may not offer a surrender value for term insurance plans at all.
Read More: 5 Steps To Follow When Buying Term Insurance Plan Online
Summing it Up
Term insurance is considered to be one of the best life insurance plans in the market. The prime reason being that it offers a lifetime of comfort to the loved ones of the policyholder in case of their untimely demise. However, like everything has another side to it, so does term insurance.
We discussed the advantages and disadvantages of life insurance in this blog. We hope that this information helps you make an informed choice towards choosing the plan for the future of your family and loved ones. For more details on the best term insurance plan to buy in India in 2022, do visit PayBima.
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