May 29th, 2019 | Updated on June 28th, 2022
Buying an insurance policy is not an easy task. Especially for those people who are doing so for the first time understanding the policy and its various terminologies keeps such people on their hooks.
Here we are going to tell you a few things about a term insurance plan, and its advantages and disadvantages.
What Exactly Is Term Insurance Plan?
Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified “term” of years. Term life insurance is typically the most affordable one that offers maximum insurance coverage for the lowest premiums, and provides a payout for your loved ones if you die during a specified period or term.
Before going for a term insurance plan, it makes sense to ask some questions in order to determine which one to purchase.
Q1. Does The Premium Of Policy Bought Today Change In Future?
A1. Until unless specified the premium remains the same till the policy matures. However, if the policyholder himself makes a change in the policy terms then that situation is different.
Q2. In Case The Person Develops Life-threatening Habit What Would Happen?
A2. If policyholder starts smoking or drinking after taking the policy, he needs to inform the service provider. The insurance giver may make changes to the policy premiums or may cancel the policy altogether.
Q3. Is Premium More If The Policyholder Smokes?
A3. This totally depends from one company to another. It is better you clarify this point with the agent you are dealing with.
Q4. Do You Get Claim Settlement In Case Of Accidental Death?
A4. Yes, you do get claim settlement in case of accidental death. In fact, whatever the cause of death the settlement is done. Just in case you attach riders like disability, accidental death, etc. to your policy your nominee might receive more than the sum assured.
Q5. Will The Life Insurance Still Be Valid, If The Death Happens Outside India?
A5. Yes, you would get the settlement amount even if the death happens outside India. However, for that, you need to provide the insurance company details of your shifting base. Since some countries like Pakistan, Burm, and Somalia are unsafe, you may not get a settlement if you shift there. Consult your insurance company to know more.
Advantages Of Term Life Insurance
There are multiple benefits of Term life insurance. Let us have a quick look at some of them.
- 1. Affordable Premiums-In comparison to other insurance policy types, Term life insurance has much more reasonable rates of premium. So even if your budget does not permit you can opt for a term life insurance policy and be assured that your family will not suffer after you.
- 2. High Coverage- Despite having such affordable premiums, the term life insurance provides a high coverage which is a very big plus point for them. As a rule, it is mandatory that you have insurance coverage which is ten times your salary and that can only be given by Term life insurance plans.
- 3. Full Future Financial Security- Here you are getting very high cover at affordable premium prices. If you consider it in comparison to other insurance plans they may offer you other benefits but not so much coverage. In case of any mishappening, the bulk money received by your family is going to keep them focussed and moving ahead in life.
- 4. Simple To Understand- The terms and conditions of a term life insurance policy are much easier to understand in comparison to other policies. Here, you do not have to make it very complicated. Just pay the premium and get the coverage. Nothing else is required.
- 5. Flexibility- It is always comparatively easier to come out from a term life insurance policy than any other one. That is primarily because you just have to stop paying the premium, and the coverage would also stop. Nothing could be more simpler than that.
- 6. Tax Benefits- All the insurance policies provide you tax benefits under the Section 80 c. However, unlike the other policies, this one proves helpful as the cost of the premium is pretty less and that coupled with the tax benefit makes it a beneficial situation.
Disadvantages Of Term Life Insurance Policy
Like other policies, the term life insurance policy also has its share of flaws. Have a look at some of them:
1. The premium for term life insurance policies tends to rise as the age progresses. So, if you wish to opt for one when your age has increased, you might find it not so affordable.
2. In case you have reached the age of 65 or 70, you would not be given a term life insurance plan. Even if you manage to get one, there would be a lot of terms and conditions attached to the same.
3. If you want to save the money for a purpose like a child’s education, marriage, retirement, and any other future plans then term life insurance policy is not the right choice for you.
4. Even when you are alive, you cannot derive any kind of capital benefit after purchasing a term life insurance policy. You can basically not hope to draw any kind of earnings from the policy.
5. You can also not expect to get any surrender value or loans against this policy.
6. While other insurance policies keep the inflation factor in consideration there is no such respite in a term life plan. There is no way you can make any profit out of the policy you have made.
7. There is no scope of wealth creation through the term life policy.
8. If in case you fall sick and hence become non- insurable you cannot hope of getting any new insurance policy or term renewal to compensate.
Even though it has its share of plus and minuses the term insurance policy is a great option for those who are worried about the future of their family in case of any untoward incident. However, it is always advisable to understand the policy first before taking any rash decisions.
Since any policy is set for a long duration, it would be wise if you read and comprehend the terms and conditions. Life insurance is absolutely necessary for anyone to keep himself protected. By choosing the right policy, you give yourself complete peace of mind.