Advantages & Disadvantages of Term Insurance over other traditional life insurance products
Term life insurance is one of the best life insurance products available for purchase. A pure term insurance policy covers against the death of the insured and provides the claim proceedings to the kin of the deceased. Term insurance policy is offered in different types ranging from pure term insurance to return of premiums term insurance.
Let us understand the advantages and dis-advantages of term insurance and decide which life insurance product is to be taken. As per the experts opinion every individual should have some sort of life insurance protection.
Advantages of Term Insurance:
- Financial protection to family: The first and the most important reason to opt for term insurance is the kind of financial protection it provides to your family. As discussed already term insurance claim proceedings are given to the family of the deceased in case of sudden demise of the insured. The designated sum assured which is paid to the family members provides financial security to the family in the absence of the insured. This amount can be utilised by the family for the educational purpose of the children or any other such purpose.
- Income tax exemption: Government of India is offering income tax exemption for people taking life insurance. This exemption is provided to encourage people to take life insurance protection which comes handy at the time of unfortunate death of the insured.
- Section 80 C: Under this section of Income Tax, you can avail tax benefit for the premium paid towards the policy. The premium paid towards term insurance, up to a maximum limit of Rs.1.5 Lac is eligible for tax exemption under section 80 C of Income Tax.
- Section 80 D: The premium paid by you for the Critical Illness rider can be claimed for exemption under this section of the Insurance Act. Under this section of Income tax both “indemnity” and “defined benefit” kinds of health insurance including critical illness is eligible for tax benefit.
- Low premium & High Sum assured: The premium that is to be paid in the term insurance is low while the sum assured that is given is high. For example a person aged 25 years with an annual income of Rs.10 Lakhs is eligible for a sum assured of up to 15 times of his/her annual salary. In this case for a sum assured of Rs. 1.5 Crore and for a period of 30 years the yearly premium comes around Rs.10, 000. If you want to take any other life insurance product with such sum assured then the premium would be very high compared to the term insurance.
- Easy to purchase online: With the advent of the technology it has become easier to purchase term insurance than before. IRDA has now scrapped the wet signature requirement and life insurance can be given now electronically. You can visit our website https://www.policybachat.com/ and search for term insurance plan comparison among the insurers we have listed. The term insurance policies in India are available on the website for display; the premium is calculated using the term insurance premium calculator. There is term insurance for senior citizens in India available in our website for the best rates.
- Riders: The term insurance is a base policy like that of pizza base without any toppings. Riders or otherwise called toppings on a pizza can be opted at the time of purchasing the policy. Extra premium is to be paid for each rider which is same as the extra amount to be paid for each topping on a pizza. Different riders offered include money back, critical illness rider, accidental death benefit rider and waiver of premium in case of critical illness or disability rider.
Disadvantages of Term Insurance:
- Expensive if Old or Unhealthy: Term insurance premiums can be on the higher side if you are old or unhealthy. This is due to the logic that younger the person, lower the risk of death. For higher sum insured it would be mandatory to undergo medical checkups at the prescribed diagnosis centre of the insurance company. So it is always advisable to take term insurance at a very young age up to the age of 60 or retirement as one desire. The premium remains constant throughout the policy period.
- No cash value component: No cash value component associated with the term insurance policy. In pure term insurance the insured will not get any cash benefits or returns after the policy term if the insured survives. All the premiums paid will be forfeited by the insurance company in case of survival of the insured. So the premium paid during the policy term is only for protection against death and no returns/bonuses are obtained at the end of the policy term.
- Insured cannot reap the benefits: In term insurance as discussed the claim proceedings are paid to the family members of the deceased and there is no survival benefit. So the insured that pays the premium cannot enjoy the claim proceedings as he would be dead for the policy to trigger.
Click on https://www.policybachat.com/life-insurance for term insurance plans comparison and get the best term insurance quotes.