Advantages and Disadvantages of Term Insurance in India

Term insurance plan is a simple and purest type of life insurance. This insurance plan is specifically designed to offer the financial cover to the dear ones in the event of their sudden demise. It provides death benefits by just paying the specific premium for a particular policy duration. The death benefits given to the nominee by the insurance provider would help them in meeting their financial needs during the difficult times. It is important to understand each and everything by an insurance product before deciding to invest in it. To know about various advantages and disadvantages associated with a term insurance plan, read ahead.

Advantages of a Term Insurance Policy

A term insurance plan provides protection and life cover to the policyholder. Some of the major advantages of a term insurance plan are as follows:

• Offers Financial Protection: One of the most important reasons to buy a term insurance plan is the financial protection offered to your family members in your absence. The nominee is entitled to receive death benefit by the insurance company in the event of sudden demise of the policyholder.
• Tax Benefit: The term insurance plans provided by several insurance providers offer tax benefits to the policyholder. The premium paid towards a term insurance plan is less and is entitled towards a tax benefit as per section 80 C of the Income Tax Act.
• Cost Effective: Term insurance plans are known to be the most popular life insurance products as they are very cost-effective. A policyholder can gain access to a huge life cover at the cost of most pocket friendly premiums, thus making it the most preferred choice amongst everyone.

Disadvantages of a Term Insurance Policy

Like everything, a term insurance plan too has its own set of advantages and disadvantages. We have talked regarding the advantages of a term plan, now let us discuss its disadvantages that would assist you in making a wise and informed decision. The disadvantages are as follows:

• Costly if Unhealthy or Old: Premiums payable towards a term insurance plan can be on the higher end in case you are unhealthy or old. This is because of the logic that younger the individual, the lower would be the associated death risk. Thus, it is recommended to purchase a term insurance plan earlier in life. The premium payable remains constant through the entire policy duration.
• Policyholder Cannot Reap Benefits: Under a term insurance plan, the proceedings of the claim are paid to the family member of the policyholder upon his untimely death and there are no survival benefits involved. Thus, the policyholder who pays the premium amount cannot reap any benefits from this plan.
• No Cash Value Component: There is no cash value component related to a term insurance plan. For a pure term insurance plan, the policyholder would not receive any returns or cash benefits after the plan term in case the policyholder survives. If the policyholder survives, all the payable premium would get forfeited by the insurance provider. 

Also Read: How Is Traditional Life Insurance Different From Money Back Plans?

What Is The Need To Purchase A Term Insurance Plan?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.