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Know the Pros and Cons of a Term Insurance Policy

A term insurance policy is one of the purest forms of a life insurance product that you would wish to have. Buying a term plan ensures that a fixed sum of predetermined death benefits for your family and then reliving them out of the economic crisis possibly due to the sudden loss of the breadwinner of the family. It can be viewed as the income replacement plan, which gets activated upon the demise of the policyholder.

Regardless of whether you are single, married, young or have ageing parents, make sure that you do have a term insurance policy. Life is uncertain and no one can predict what may happen tomorrow. Therefore think wisely and act smartly.

In this article, let us understand the pros and cons of a term insurance policy.

Pros of a Term Insurance Policy

Let us understand the pros of a term insurance policy listed below:

  • Easy to Buy

    When it comes to buying a term insurance plan then it is simply no rocket science. Buying a plan is easy and in the times of COVID-19, it is highly recommended to buy the term insurance plan online.  Besides, buying a term plan online will also help you to save money than a term plan that is bought offline.

  • Easy to Understand

    The term insurance plan is one of the simplest life insurance products accessible in the market. One can buy the term plan simply by giving the correct income and personal information. It is after then the term insurance company will determine the amount of the sum assured on the premise of certain important factors such as the illness, lifestyle habits, age, etc. The nominee will receive the death benefit in the event of the demise of the policyholder within the policy period subject to payment of premiums regularly.

  • Cost-effective

    The term insurance premiums are cost-effective when compared to any other types of insurance plans or investment accessible in the market. This essentially means that a term insurance plan is one pocket-friendly way to keep the financial future of the family protected.

  • Save on Taxes

    A term insurance plan not only provides financial security but helps to save on the taxes. The deduction from the income includes the premiums that you will pay for the term plan within Section 80C.  The death benefits also remain tax exempted within Section 80D, which will relieve your family members from the burden of tax upon the death benefits received from the term insurance company.

Cons of a Term Insurance Policy

Now, that we know the pros of a term plan let us understand the following cons of a term plan:

  • No Maturity Benefit

    Mostly the term insurance plans do not offer maturity benefits. In case the policyholder outlives the policy term then the number of premiums paid remain with the term insurance company. It also means that when the policyholder outlives the policy term the person has got more time to support and stay with the family, which is good. Most people think that non-receiving of maturity benefits as a loss of money on the paid premium. This is mostly thought over by people who take a term insurance policy as a tool of investment and do not realize the intent of buying the term plan is to provide financial security for the family. However, there are certain term insurance companies that have introduced plans that offer the return of premiums paid within the complete policy term.

  • Negligible Motivation

    It is commonly noticed that most of the people discontinue paying the term insurance premiums as they foresee it as an unnecessary expense. People are also of the opinion to earn returns that are corresponding to the premium sum paid and that is why do not favour the concept of a term insurance plan, which involve the death payouts upon the untimely demise of the policyholder.

Well, the concept of a term insurance policy as such does not have cons. The disadvantages that are viewed by the people are the mere misunderstanding that is a result of ignorance for the product and disinterest in regards to protecting the family.

The Bottom line

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 gives you peace of mind.

It is also feasible to take a sufficient term insurance 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 insurance plans 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.

Written By: PolicyBazaar - Updated: 10 November 2020
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