Count the benefits & negatives before buying a term plan

Life Insurances 181 views

Term insurance is a good option to get the highest risk cover by paying the minimum premiums. It offers you maximum cover amount at a very nominal over as low as Rs. 10 per day or even less than that. All these are marketing tricks used by insurance companies to lure people to buy risk cover. These term plans don't work as life insurance as they don't help you in building the money over the period of time, rather these term insurance plans offer you good risk cover against your premiums for a defined period of time. If the insured person died because of some uncertain situation in that case these term insurance plans offer security amount to the nominee. You should always buy a term insurance plan buy evaluating it on various parameters. Don't buy a plan just because it is offering you a life cover or Rs. 1 ccore by paying a nominal amount as low as Rs. 15 per day. Here are some advantages or disadvantages related to term plan to make you understand them better:

Advantages of term plan:

Simple to understand: Term insurance plans are much simple to understand than any other life insurance policy such as endowment policies, which combines risk cover along with savings. The plans, which comprises risk cover along with savings components are also known as cash value plans. It is not always simple to understand the different terms and complexities related to the policy for a common man. Generally, people pay much attention too the cost of premium he/she pays into the risk cover and the amount he/she will get. In term insurance plans, it is really simple to do such calculations and find out the cost and the amount actually being invested.

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Competitive prices: Various companies offer term policies and provide different sum assured against the policy for risk cover. You can compare these term policies with each other on the basis of price as they are more or less same. It is increasing the health competition among the companies to offer competitive rates with maximum benefits to lure more customers. Due to the competitive market and rates, it is gaining popularity among the people and large number of people are investing in these term plans. Here, people hardly find any difficulty in understanding the terms of the policy.

Flexibility of terms: It is simple to select a term life policy as compared to getting the cash value policies. There are many term life insurance policies which are renewable and convertible. It also enables you to get another term plan without any medical examination at the end of the first term policy. It also gives you benefit to convert your term life policy into an endowment policy for the same assured with associated increase in premium.

Tax benefits: If you buy any endowment type of insurance plan, you enjoy higher tax benefits as the premium you pay for your policy is much higher as compared to term insurance policy. However, the premium paid for your term insurance plan be it small or big is also eligible for claiming tax benefits under Section 80C of Income Tax.

Lowest premium: The premium of term insurance is much lower than that for comparative cash value insurance policies. The premium amount for term plan is lower because you will not receive any sum assured after completion of the policy.

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Disadvantages of term plan

Not ideal for building funds: The term insurance plan is not the ideal policies if you want to build the funds over the period of time. Though, these policies provide you higher risk covers, but such policies don't provide you any assured some after completion of the policy tenure as you receive in any other life insurance policy.

Not available for senior and super senior citizens: These terms insurance plans are not available for people who have completed the age of 65 years or 70 years. So, you are are in the category of senior citizen or super senior citizen there are chances that these companies will not offer you any term insurance plan.

No survival benefits after maturity: It will not provide any survival benefits to your family after completion of the policy tenure. It will not provide any amount or sum assured in case the insured person is alive after completing the tenure of the policy.

No perfect for saving money: If you want to save money for your retirement, child's education or for any other long-term purpose, so this is not the right choice for saving money. These plans don't offer you any sum assured after maturity of the policy, rather than just benefit of renewal with medical examination.

Renewal of any policy: This is another condition with this term insurance plan. In term policies, if you stop paying the premiums the risk cover ceases and policy ends. If you discontinue the policy or stop paying the premiums in between, you will not receive any benefit from the company against your policy. However, the cash value policies will give you promised survival benefit if the premium is paid for the whole tenure. If you stop paying premiums in the mid of the policy or before the tenure, you have to face the financial loss as you can't get your savings portion of the policy without the documents.

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Benefits are available only till tenure: In term insurance policy you can avail the benefits linked with the policy till the tenure last. After completion of the tenure you can't claim the tax benefits and other benefits.