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Term Insurance Advantages and Disadvantages in India

Term insurance is one of the simplest and most affordable types of life insurance that secures the financial future of your loved ones in your absence. But, when it comes to protecting your family financially, the main question is, ‘Would buying a term insurance plan be beneficial’? What are the disadvantages of term insurance or the risks involved with the plan? Therefore, let us understand some of the term insurance advantages and disadvantages.

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What is Term Insurance? 

Term insurance is the simplest form of life insurance product that offers financial protection by providing a large life cover amount (sum assured) at comparatively low premium rates. In case of the policyholder’s death during the policy tenure, the life cover is paid to the beneficiary/nominee. As the name suggests, term insurance is an affordable insurance plan that offers coverage for a specific tenure or time. This plan helps cover expenses by your family members in case of your unfortunate death. 

Note: You can calculate the term plan premium on the term insurance calculator online tool by Policybazaar.

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What are the Term Insurance Advantages and Disadvantages?

Now that we have understood what is term insurance, read on to learn more about term insurance advantages and disadvantages:

Advantages of Term Insurance Plan

Here is a list of the various advantages of term insurance that can help you make an informed decision.

  • Cost-effective: When comparing term insurance advantages and disadvantages, the affordability of term plans is one of the biggest advantages of term insurance. Term plans are one of the most cost-effective types of life insurance. The life assured can get large life coverage at the pocket-friendly term insurance premium cost, which makes it a favoured option for everyone. 

  • Large Sum Assured: With term plans, you can secure a high sum assured at affordable premiums. For example, you can secure a sum assured of Rs. 1 Crore at just Rs. 525 per month.

  • Rider Benefits: With the term insurance rider benefits, you can enhance the advantages of term insurance by increasing the policy cover at nominal premiums. By adding riders to the base plan, you can get coverage against critical illness, terminal illness, accidental death, accidental total permanent disability, hospicare, and waiver of premiums.

  • Flexibility: The term insurance plans offer a higher level of flexibility namely two aspects that are renewable and convertible. The life assured can renew the term insurance plan without undergoing any medical examination. The life assured 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.

  • Easy to Buy: You can easily compare the premiums and benefits of term insurance plans offered by different insurers and select the most suitable plan for your profile. 

  • Simple: The term insurance plans are one of the easiest products compared to other life insurance products such as money-back plans, endowment plans, etc. Various other life insurance plans offer insurance as well as investment benefits. 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.

  • Flexible Claim Payout: Term Insurance gives the policyholder the option to choose how the sum assured will be paid to the nominee after their death, either in a lump sum or in instalments. This flexibility allows policyholders to decide on a schedule for payouts, therefore, providing stability and ease for the nominee's financial situation.

  • Tax Benefit: You can also claim term insurance tax benefits as per the prevailing tax laws under sections 80C, 80D, and 10(10D) of the Income Tax Act, 1961.

Note: The tax benefit is subject to change in the prevailing tax laws.

Note: Check out the best term insurance plan in India and choose one that suits your requirements.

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Disadvantages of Term Insurance Plan

We have discussed the advantages of term insurance above, now let us understand the disadvantages of term insurance plan that will help you to make an informed decision:

  • No Investment Opportunities: Term insurance does not involve any investment component. While some insurance policies provide maturity benefits like bonuses, term insurance solely offers death benefits, with some plans including survival benefits. It's important to note that term insurance is not intended for investment purposes.

  • No Assistance When Alive: When comparing term insurance advantages and disadvantages, term insurance plans are not designed to assist in terms of finances while the policyholders is still alive.

  • No Survival Benefit: When the life assured outlives the life insurance policy tenure, no survival benefit will be received in the case of a regular term insurance plan. However, in case of a term return of the premium plan, the entire premium amount paid throughout the policy tenure is returned on survival of the policy term.

Wrapping it Up

Term insurance plans are the most suitable life insurance options, especially for those seeking coverage during years of significant financial responsibilities. These plans can help your family off the remaining education loans and home loans. It is important not to rush the decision-making process; instead, take the time to assess your needs, weighing the term insurance advantages and disadvantages options. By carefully analyzing your financial liabilities and comparing them to your savings, you can identify the most suitable plan for yourself. Making an informed choice ensures that you and your family are well-protected, providing peace of mind amidst life's uncertainties.


  • Q: What are the term insurance advantages and disadvantages?

    Ans: Term insurance has some advantages, such as affordability, high life cover, payout options, tax benefits, different riders, etc. The disadvantages of term insurance are surrender amount and no cash value accumulation.
  • Q: What are the main advantages of term insurance?

    Ans: The main advantages of term insurance are the financial security of your loved ones in the event of your unfortunate demise during the policy tenure. These plans offer longer coverage with options to be covered till the age of 99 years. Also, the plan offers the option of enhancing the base cover using rider benefits or at different milestones.
  • Q: What are the disadvantages of term life insurance?

    Ans: Here is a list of disadvantages of term life insurance:
    • Premium depends on age
    • No component of investment
    • Surrender amount
  • Q: Is term insurance good or bad?

    Ans: Whether term insurance is good or bad depends on a person’s individual needs. Term insurance, in general, is a good financial product to buy as it ensures your family's financial stability in case of an eventuality. These affordable plans offer a large life cover for a long policy tenure.
  • Q: Which company offers the best advantages of term insurance?

    Ans: The company that offers the best advantages of term insurance depends on an individual’s needs. You can learn more about the term insurance advantages and disadvantages and select the most suitable plan per your requirements.
  • Q: Who gets the benefit of term insurance?

    Ans: Your family will receive the life cover or sum assured in case of your unforeseen death within the policy term.
  • Q: What are the term insurance advantages and disadvantages?

    Ans: Term insurance advantages and disadvantages encompass various aspects to consider before purchasing a policy. Understanding these can help make an informed decision about your insurance needs.
  • Q: What are the main advantages of term insurance?

    Ans: The main advantages of term insurance include cost-effectiveness, large sum assured, rider benefits, flexibility, ease of purchase, simple policy structure, flexible claim payout options, and tax benefits.
  • Q: What are the disadvantages of term life insurance?

    Ans: Term insurance disadvantages include no investment opportunities, lack of assistance while alive, no survival benefit if the policyholder outlives the term, and no cash value accumulation.
  • Q: Which company offers the best advantages of term insurance?

    Ans: The company that offers the best advantages of term insurance may vary based on individual requirements and preferences. It's essential to compare policies from different insurers to find the most suitable one for your needs.
  • Q: Who gets the benefit of term insurance?

    Ans: The beneficiaries designated by the policyholder receive the benefit of term insurance in the event of the policyholder's death during the policy term. This benefit provides financial support to the beneficiaries during a difficult time.

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