Know the Pros and Cons of a Term Insurance Policy

Pros and cons of a term insurance policy help you understand the key benefits and limitations of this type of life insurance. Term life policy provides financial protection to your family for a specific period, ensuring that they are supported in case of unforeseen events. While it is often more affordable and straightforward than other life insurance options, it is important to weigh both the advantages and drawbacks before choosing a policy. This guide will help you make an informed decision by explaining how term insurance works and what factors to consider.

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Note: Know what is term insurance first and then buy a term plan for your loved ones.

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What are the Pros of a Term Insurance Policy?

Term insurance is designed to provide financial protection to your loved ones in the event of your untimely demise. Let us understand the pros of a term insurance policy listed below:

Affordable Premiums: Term insurance offers a large life cover at relatively low premiums, making it a budget-friendly way to secure your family’s future.
Financial Protection for Dependents: In the event of your untimely demise, your family receives a lump sum payout to cover debts, daily expenses, and other financial obligations.
Tax Benefits: Premiums paid are eligible for term insurance tax benefits under Section 80C, and the death benefit is tax-free under Section 10(10D).
Simplicity and Ease of Understanding: With no complex investment components, the term life policy focuses solely on providing life cover for a defined period.
High Coverage Amount: You can secure a significant sum assured at an affordable price, giving your family large financial support.
Multiple Payout Options: Many plans allow you to choose how the death benefit is paid, lump sum, regular income, or a combination of lump sum + monthly income, giving your family control over the payout amount.
Customisation with Riders/Add-ons: You can enhance your coverage with important term insurance riders, such as critical illness or accidental death benefits, for a nominal additional cost.
Fixed Premiums: Premiums remain constant throughout the policy term, protecting you from unexpected hikes.Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying.
Income Replacement: The death benefit can act as a replacement for lost income, helping your family maintain their lifestyle and meet ongoing financial needs.
Online feasibility: You can easily research, compare, and buy term insurance plans online. This transparent process helps you find the best term insurance plan from the comfort of your home.

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What are the Cons of a Term Insurance Policy?

While term insurance provides essential financial protection, it also comes with certain limitations. Here’s a detailed breakdown of the disadvantages:

No Maturity: In case you outlive the policy’s term, you do not get any payout or return on premium amount paid.
Temporary coverage: The coverage is for a fixed term or limited term. Once the plan expires, you are no longer covered. In case you need the coverage after that, you will have to buy a new policy.
Premiums increase with age: If you decide to buy or renew a new policy after the expiration of your original term, the premium amounts will be higher. This is because your health risks and age have increased.
No cash value or investment: A regular term plan does not have a savings or investment component. The plan doesn’t accumulate any cash value that you can withdraw or borrow against while you're alive.
No financial assistance while alive: The plan is designed to pay out only in case of policyholder’s death during the policy tenure. It does not provide any financial support for the living needs of policyholder.

How to Balance the Pros and Cons of Term Life Insurance?

When looking at a term insurance or life insurance policy, it’s important to see your financial needs instead of focusing on just the benefits or the drawbacks. Let us take a look at how you can balance the pros and cons of term life insurance plans.

Understand Your Goals: Decide whether you need cost-effective coverage for a fixed period or prefer a lifelong policy with wealth creation benefits.
Assess Affordability: Check if the lower premiums of a term life policy fit comfortably into your budget while still allowing you to secure higher coverage.
Choose the Right Term: Match the policy duration to your key financial responsibilities, like paying off a mortgage, supporting children, or reaching retirement.
Calculate the Coverage Amount: Ensure your sum assured covers debts, income replacement, and future family expenses without paying extra for unnecessary coverage.
Consider Riders: Enhance your policy with term insurance riders, such as critical illness or accidental death benefits, if they suit your specific needs.
Consult a Professional: Seek advice from a certified insurance advisor to align your policy choice with your long-term goals and financial situation.

Final Thoughts

When it comes to your financial portfolio, make sure that you have a term insurance policy that will secure the financial future of your family and give you peace of mind.

It is also suggested to take a sufficient term life policy cover and pay less premium sum when compared to an endowment or any other insurance plan that also provides survival benefits. It is recommended reviewing the term life policy periodically, like in every ten years. In case you feel that the requirement is more than the cover then you can easily fill the gap by simply buying another term insurance plan as well.

Note: Check all the best term insurance plan in India.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

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What is Term Life Insurance

FAQs

1. How does term insurance work?

Ans: Term insurance provides life coverage for a fixed period, known as the policy term. If the policyholder passes away during this term, the nominee receives a lump sum death benefit. If the policyholder survives the term, there is typically no payout, making it a pure protection plan without investment or savings components.
2. Is term life insurance worth it?

Ans: Term life insurance is worth it if your primary goal is financial protection for your loved ones at an affordable premium. It offers high coverage, tax benefits, and peace of mind, but it does not provide cash value or maturity benefits. Evaluating your financial goals, dependents, and long-term needs will help determine if it’s the right choice for you.
3. What is term life insurance and how does it work?

Ans: Term life insurance is a policy that offers financial protection for a specified period. You pay regular premiums, and in return, the policy provides a death benefit to your nominees if you pass away during the term. It’s designed purely for protection, without any investment or wealth-building features.
4. Does term insurance premium increase every year?

Ans: Term insurance or life insurance premiums are generally fixed for the chosen policy term, ensuring predictable payments. However, if you buy a new policy later or renew an existing term plan after it expires, the premiums may increase based on your age and health at that time.

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˜The insurers/plans mentioned are arranged in order of highest to lowest Sum Assured(SA) offered by Policybazaar’s insurer partners offering term insurance plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in

Rs. 400/month is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 400/month (Rs.13/day) is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 230 is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 8/day is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 12/day is starting price for a 75 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 497/month is starting price for a 1.5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 487/month is starting price for a 2 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 626/month is starting price for a 3 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 905/month is starting price for a 5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,267/month is starting price for a 7 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

*The full refund of premium is available on availing the one-time option of refund of premium. Total premium paid for policy (paid for add-ons) will be the special exit value, payable on availing the one-time option of refund of premium if you wish to completely exit the policy.

+Rs. 447/month is starting price for a 1 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs.679/month is starting price for a 2 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 910/month is starting price for a 3 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,374/month is starting price for a 5 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,924month is starting price for a 7 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

Women

+Rs. 400/month is Starting price for a 1 crore term life insurance for an 18 year-old Female, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 461/month is the starting price for a 1 crore term life insurance for an 24 year-old female, non-smoker, with no pre-existing diseases, cover upto 54 years of age.

1,642/month is the starting price for a 1 crore term life insurance for an 44 year-old female, non-smoker, with no pre-existing diseases, cover upto 74 years of age.

Prices offered by the insurer are as per the approved insurance plans | #All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply | **Tax Benefits are subject to changes in tax laws.| Policybazaar Insurance Brokers Private Limited

We will respond in the first instance within 30 minutes of the customers contacting us. 30-minute claim support service is for the purpose of giving reasonable assistance to the policyholder in pursuance of the claim. Settlement of claim (including cashless claim) is the responsibility of the insurer as per policy terms and conditions. The 30-minute claim support is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. For further details, 24x7 Claims Support Helpline can be reached out at 1800-258-5881

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