Advantages and Disadvantages of Term Insurance Policies

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Did you know that a surprising 998 million Indians were living without life insurance cover in 2017? This is what a survey by the IRDAI revealed.The only problem with whole life insurance policies is that they could cost a lot for the sum assured that you’d like your family to receive on your demise. This is where term insurance plans make more sense.

Unlike whole life insurance, term insurance does not have an investment component. It is a pure insurance product. This makes it much cheaper than any other type of insurance. What this means is that you can get very high cover at a fraction of the premium amount that you would need to pay for whole life insurance.

Term insurance offers protection after death, at a fixed payment rate, for a specific period of time. With the help of a term insurance calculator, you can calculate the premium to be paid to get the amount you want. Here are a few significant things to consider before buying a policy.

Pros of Term Insurance Policies


  1. The premiums for term insurance plans are lower than that for other types of life insurance,while offering similar death benefits. This is because you only have to pay for death benefits, which will be received by your beneficiaries if you expire during the term mentioned in the policy.
  2. Term plans are much easier to understand, even for a layperson.Planning your financial goals, understanding endowment policies, dividing the premiums and so on can be stressful. But term insurance does not have these complications. All you have to do is simply pay the premium and fix the sum assured for the particular time period.
  3. Cancelling a policy is also very easy. To opt out, you simply need to stop paying the premiums. Your policy will be automatically terminated. You can even renew it, if required.

Cons of Term Insurance


  1. Even the best term policy might not be economically beneficial because the premiums keep increasing every time you renew the cover. Also, many companies do not offer term insurance beyond the age of 65 to 70 years.
  2. If you outlive the policy term, there is no sum assured to be received. So, these plans are for pure protection, rather than wealth creation.
  3. Lastly, when the term ends, the policy will stop coverage. In case you become uninsurable while you term is still on, the whole process of purchasing another term becomes expensive.

Term insurance can be an important part of your financial plan. Along with understanding the terms and conditions of this type of insurance, use a term insurance calculator to make an informed policy decision.

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