Term insurance is the most common type of insurance. Apart from the benefits it provides, there are some disadvantages of term insurance.
In this article, we will explain the advantages and disadvantages of term insurance.
A term insurance policy is a product that can provide financial protection to the policyholder’s nominees. It offers a death benefit to the policyholder’s dependants in case of an unfortunate event. If the policyholder passes away during the term of the policy, then the insurance company will provide the nominees with the cover amount. Hence, it can ensure the financial protection of the policyholder’s family.
While there are many term plan benefits, they have a few disadvantages. Here are the advantages and disadvantages of term insurance-
Advantages of Term Insurance
The most important benefit of term insurance is the death benefit. In case the insured person dies during the tenure, which will lead to loss of income for the family, the insurance provider can offer the death benefit to them.
It is Easy to Understand
There are various types of insurance plans, such as term insurance, endowment plans, etc. Unlike other plans, which can be confusing, term insurance plans are the easiest to understand. The policyholder must simply pay the premiums and get the benefit of life cover.
Under Section 80C, the premiums paid to purchase term insurance are eligible for tax deductions. The tax deduction limit is Rs. 1.50 Lakh.
It is Cost-Effective
Term insurance is very cost-effective. As it doesn’t offer any survival benefit, the premiums of term insurance are low compared to other types of life insurance policies. Hence, term insurance can provide a huge life cover amount at a lower premium. Thus, it is a great option for people who need insurance but don’t want to pay heavy premiums.
Apart from the death benefit, a policyholder can get enhanced protection by opting for add-ons. Such add-ons aren’t a part of the policy but can be purchased by paying extra premiums. Some of the most important add-ons are- cover against personal accident, disability add-on, waiver of premium benefit, critical illness cover, etc.
It Can Be
Most insurance companies are offering their term insurance online. Hence, individuals should assess their requirements and compare various plans. Based on the requirements, buy the policy online.
Disadvantages of Term Insurance
- There is No Survival Benefit
While term insurance offers death benefit, it doesn’t offer any survival benefit. In case the policyholder survives the term, he/she will not receive any benefit. The policyholder will lose all the premiums paid.
It Can Be Expensive for Old-Aged People
Buying a life insurance policy can be less expensive for people who are young. This is because the premium of the plan is determined based on age, medical condition, etc. As younger people have fewer medical problems, their premium tends to stay lower. However, people who are above 40 or have an illness are considered riskier customers. Hence, the premiums are higher for them.
Opt for Term Insurance for Financial Security
While term insurance might not provide any maturity benefit, it can offer a death benefit to the policyholder’s family in case of an unforeseen event. This benefit can protect them from financial burden. Also, as it is less expensive, buying this policy might not have a huge impact on the insured person’s finances.