Advantages and Disadvantages of Term Insurance in India
Term insurance plan is one simple and purest form of the life insurance plan. The term plan is designed to provide the financial cover to the family members in case of the untimely death of the policyholder.
The term insurance plan offers death protection by simply paying the specified premium sum for the specific policy term. The death benefit received by the nominee will help them to cover the financial needs in the coming times. When it comes to buying the best term insurance plan, you must understand the product well.
In this article, we will discuss the advantages and disadvantages of the term insurance plan in India.
Advantages of Term Insurance Plan
The term insurance plans offer life coverage and security to the insured. Apart from these key advantages, some of the other key advantages of the term insurance plan are listed below:
- Simple: The term insurance plans are one of the easiest products compared to other life insurance products such as the money-back plans, endowment plans, etc. The various other life insurance plans are an amalgamation of savings along with savings. On the other hand, with a term insurance plan, you need to pay the premium sum and obtain life coverage for the policy term chosen.
- Flexibility: The term insurance plans offer a higher level of flexibility namely two aspects that are renewable and convertible. The insured can renew the term insurance plan without undergoing any medical examination. The insured can also covert the term plan into an endowment pan for the sum assured existing with the increased premium sum. It is easy to opt-out from the term plan wherein as soon as you stop paying the premium sum, the policy will cease and that leads to ending the policy. Unlike endowment plans, the insured need not worry about the pay-outs. The term plans offer a death benefit and have no component of savings.
- Cost-effective: The term plans are one of the most sought after and cost-effective life insurance products. The insured can access huge life coverage at the pocket-friendly term insurance premium cost, which makes it a favoured option for everyone. The term insurance premium rate is six times less than the premium sum of the other life insurance products.
- Tax Benefit: The term insurance plans offered by different life insurance companies offer a tax benefit to the insured. The term insurance premium is less and entitles for a tax benefit within Section 80C.
Note: The tax benefit is subject to change in the prevailing tax laws.
Disadvantages of Term Insurance Plan
When it comes to buying the term plan, the term insurance premium surely grabs the attention. However, everything has its advantages and disadvantages. We have discussed the advantages above, now let us understand the listed below disadvantages of a term insurance plan that will help you to make the informed decision:
- The term plans are not meant for those who intend to save money for any specific needs such as higher education, retirement planning, marriage, and so forth.
- The insurance plans are not designed to assist in terms of finances when the policyholders’ family is alive.
- Buying a term insurance plan does not mean that it will enable you to create wealth. Moreover, they are no profit plans as they do not provide any hedge against inflation.
- The term insurance plan is designed in a way wherein the insured pays the specified sum only for the life coverage that implies that the plans are not designed to build the cash value. The term premium is paid by the policyholder to the insurance provider with the intent to pay a death benefit to the nominee in case the insured is no more. When the insured outlives the policy tenure, no benefit will be received.
Wrapping it Up
The term insurance plans are one of the ideal life insurance products available in the market. The prime intent of buying the term insurance plans is to provide coverage at those years when the insured has any financial liabilities.
The term plan is ideal for those who are looking forward to covering themselves and the family from any such financial responsibility such as education loans, home loans, and so much more.
While selecting the term insurance plan, do not rush, give time and choose the plan that fulfils the requirements. Besides, before making the final decision analyze the financial liabilities. Compare the expenses to the savings and you will understand where you might fall short. Select the term plan that fills the gap between the savings and expenses effectively that is not heavy on the pocket side.