Pros and Cons of Buying a Term Insurance Plan

One of the most basic and pure forms of life insurance is a term life insurance policy. Its purpose is to provide financial support to loved ones in the event of the life assured's untimely death. The policy offers death protection by paying a certain premium amount for a set period of time. The death benefit obtained by the beneficiary may be useful in covering future financial requirements. However, selecting the best term insurance plan involves making an informed decision based on an awareness of the benefits and drawbacks of term insurance.

Advantages of a Term Insurance Plan

As we all know, term life insurance provides the insured with life coverage and protection. Aside from these benefits, term insurance also includes the following significant features.

• Simplicity - Term insurance policies are less complicated than other types of life insurance, such as endowment or money-back plans. Other life insurance plans combine risk protection with savings; but, a term plan is as straightforward as its name implies: pay the premium and get life coverage for the policy period chosen. Moreover, purchasing a term plan is simple and straightforward. It does not require any lengthy procedures or documentation. You can buy it without the assistance of an insurance agent by purchasing it online.
• Affordability - Regarded as one of the most cost-effective life insurance products, a term life insurance policy can get you a lot of life coverage for a low premium, making it one of the most economical options. Term insurance premiums are about six times lower than the premiums for regular life insurance products. Due to its affordability, even a low-income person can simply get a term insurance policy.
• Higher Coverage - Term insurance plans are not only less expensive, but they also provide more coverage to ensure the future of your dependents. In the case of an investment plan, this level of coverage is pretty unattainable. A high level of coverage ensures your family's financial security. If you want to provide your family with significant financial security, you should buy a term insurance plan.
• Surrender Value - After a few years, all life insurance policies, including term plans, provide a surrender value. The term plan, on the other hand, has a larger surrender value. You can surrender the policy and receive the surrender value whenever it reaches a certain level of maturity.

Must Read: Make the Most of Your Term Insurance Plan with Its Tax Benefits

Disadvantages of a Term Insurance Plan

The lower rates of term insurance policies are undeniably one of the most appealing reasons to purchase life term insurance, but as the old adage goes, every coin has two sides. As a result, it is vital to know the disadvantages before purchasing a term life insurance policy. The disadvantages of a term life insurance policy are listed below.

• No Investment Returns - Term insurance plans, unlike other investment plans, do not provide a return on investment during your lifespan. Perhaps the only benefit you can expect is to provide financial security to your family after your death. However, some term plans have a "Return of Premium" clause, which implies the policyholder will receive a refund of all paid premiums if he/she lives to the end of the policy term.
• No Maturity Benefits - This is the most significant disadvantage of the term plan. If you are alive till the policy term completion, you cannot demand financial assistance from your term plan provider, especially if you want to take a portion of the money or receive any other type of return that another type of insurance plan provides.
• No Wealth Generation - If your goal is to build riches by paying a premium for a term plan, you will be disappointed. Term plans are non-profit plans; they may only need you to pay the premium until the term plan matures or the life assured passes away, at which point the sum assured is given to the policyholder's family or nominee.
• High Premium For Old Applicants - If you get a term plan later in life, you will have to pay a greater premium for a higher sum assured, which is not feasible for everyone. Some people may require a large sum assured yet are unable to pay a higher premium. In such circumstances, the individual must either take on additional debt to pay a premium that is higher than his budgeted amount or compromise the sum assured.

Conclusion

For most people, a term life insurance plan is one of the best life insurance options. The primary goal of a term insurance policy is to provide coverage during the years when an insured's financial obligations are the greatest. Individuals who want to protect themselves and their families from financial obligations such as student loans, mortgages, and other types of debt should consider this plan.

Also Read: All About MyLife Protection 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.