Advantages and Disadvantages of Term Insurance vs 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 proceeds 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.
Term Insurance is one of the best lifesavers that a responsible individual can own. Although there are many investments choices available, the term insurance plans differ from others. This can be simply implied as the best choice to protect your family in your absence.
Let us understand the advantages and disadvantages of term life insurance and decide which life insurance product is to be taken. As per the expert's opinion every individual should have some sort of life insurance protection.
Advantages of Term Insurance plan in India:
- Financial protection to the 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 the 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 utilized by the family for the educational purpose of the children or any other such purpose.
- Income tax exemption: The 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 in 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: Term insurance comes under section 80d 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 are eligible for tax benefit.
- Low premium & High Sum assured: The premium that is to be paid in the term insurance cover 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 his/her annual salary. In this case for a sum assured of term insurance 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 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 PolicyBachat and search for term insurance plan comparisons 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 on 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 opt at the time of purchasing the policy. Extra premium is to be paid for each rider which is the 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 plan in India:
- 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 the younger person lowers the risk of death. For higher sum insured it would be mandatory to undergo medical checkups at the prescribed diagnosis center 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 desires. 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.
Are the Term Insurance benefits and drawbacks?
Almost all term insurance plans from all insurance companies will have more or less similar features and advantages. By understanding, those from a general perspective can undoubtedly give you a clear idea indeed.
Pros and Cons of Term Insurance plans:
|Tax Benefits of term insurance
||No cash value
||Buying at a later stage
||No return on investment
|Buying is simple and easy
||No financial Assistance while you are alive
|High Surrender value
||No wealth Creation
Critical Illness covers can be claimed by the policyholder's family, including children of the family above six years of age. This ensures no member of the family is left out from coverage when a critical illness strikes.
This term rider offers you an additional sum assured if the insured dies due to an accident. The investors happen to have a myth that they will receive the sum assured if death happens due to an accident, otherwise not. This is not true. If you don’t buy this rider, you will still be paid the basic sum assured. This rider is only for the supplementary sum assured in case the policyholder faces death due to an accident.
Click on term life insurance plans for comparison and get the best term insurance quotes online, know the term insurance advantages and disadvantages