Term Life insurance – is it a Friend or Foe?
A Term Life Insurance is the purest and pocket-friendly form of a life insurance policy. But what makes it different and more attractive is its flexible benefits and high life coverage at considerably lower premiums as compared to other life insurance plans. However, there are plenty of other benefits of term life insurance in comparison with other insurance policies, making it worth buying. To review the positive and negative aspects of Term Life Insurance, one should have a better understanding of it. So, let’s start with a short and crisp definition of Term Life Insurance.
Term Insurance is an assurance that your family will be financially protected in your absence. In the case of policyholder’s demise within the duration of the policy, the nominee receives the death benefit amount. Term Insurance offers death benefit or sum assured against the premiums paid for a specific tenure. The premiums are 10x cheaper than most of the life insurance policies; thus, it does not burn a hole in your pocket. This form of life insurance is quite flexible too, as it is renewable after the term ends and can also be converted to other policies like Cash Value Policy or Endowment Policy.
But there are certain limitations as well. Therefore, let us focus on every aspect of Term Life Insurance to perceive it’s benefits and limitations in-depth:
- Affordable Premiums: First and foremost, the primary benefit of Term Life Insurance is affordability. A term plan is way cheaper than any other life insurance policy. One can easily afford it, even with limited income. And if you are the only earning member in the family, then this is the best-rated term life insurance policy for you because it will not cost you much and secure future of your family in your absence. So, if you want to protect your family financially with limited resources, when you will be not with them, then this is the best form of the life insurance plan for you.
- Easy to Understand: Term Life Insurance has such a simple concept that even a layperson can understand its working wherein you need to pay premiums against the insurance coverage for a fixed period. It is not complicated like other insurance policies like Cash Value Policy, Endowment Policy etc. Term Life Insurance is as simple as going for grocery shopping, you go out, select, compare according to your requirement, and then you pay for it.
- Income Tax Benefit: There is a misconception that Term Life Insurance premium does not come under tax benefit as the premium amounts are quite low as compared to other insurance policies. But that’s not true. Tax benefit does not depend on the cost of the premium. All premiums of term insurance are eligible for tax deduction under u/s 80c of the Income Tax Act. Even the death benefit amount, which is paid to the nominee of the policy is also tax-free u/s 10(10)D of the Income Tax Act.
- Malleable: Malleable is something very flexible, which can be mould into any shape or size. So unlike other insurances, Term Plan is very much flexible. If you want to convert it into any other policy like cash value policy, it can be easily convertible and renewable. You can also add riders to make your Term Plan even more emphatic and effective by paying some minimal charges along with the base premiums.
- Critical Illness Coverage: Nowadays, our lifestyle is very much hectic, and we often tend to neglect our health. On top of that, the environment is polluted, and our eating habits are really poor. Therefore, we should always be prepared for the uncertainties of life. Here term life insurance plays a crucial role by offering riders such as critical illness rider to help you handle such difficult times. Such rider helps you to save your hard-earned money from draining into hospital bills.
- Unfulfilled Monetary Needs: Term Life Insurance plan does not fall under the category of profit plan, as it does not provide any surrender value. That is why this plan will not serve your purpose of monetary needs while you are alive. You will not be able to use it as a return on an investment product. For instance, if you want to buy a house by the time your term insurance policy gets matured, then it will not help you. You will not get any maturity benefit from Term Life Insurance apart from availing it in lowest premiums.
- Lack of Additional Benefits: Because of extremely low premiums, you cannot apply for any loan on behalf of your Term Insurance Policy. However, you can opt for the same in policies with higher premium like Cash Value Policy and Endowment Policy.
- Higher premiums in Old Age: Term Life Insurance policy premiums are directly proportional to your age, higher the age higher the premium amount. And in case of age beyond 65 years, it becomes tough to get a term life insurance because most of the companies do not entertain applicants above this age. Therefore, experts suggest that you buy a term plan at a young age to enjoy low premiums.
- Uncertain Future Outcome: Term Life Insurance works as per its name. It only covers you till the term period. It will stop giving you coverage when the policy term expires. And to renew the policy after completing a period of 20 or 30 years could be a bit expensive.
After examining the benefits and limitations of Term Life Insurance, we can conclude that there are a lot more benefits than limitations. It is an inexpensive way of securing your family’s future financially in your absence. And it is always advised to invest in a term plan at an early stage of life when you are young to enjoy more benefits like low premiums.
If you are also planning to buy term life insurance, then you can visit BimaKaro.in, get quotes for various term plans from top insurers, compare, and then make the buying decision.
Term Life Insurance Sahi hai, buy it today…