The term insurance is purely the life insurance plan that provides financial security to the family members in case of the sudden death of the policyholder. Term insurance plans offer death security by paying the specific premium sum for the policy term, and the amount will help nominees to fulfill their financial needs in the coming years.
There are numerous term insurance plans that different insurance companies are offering to the customers. Term plans are the best lifesavers that a responsible individual prefers to own, and work as a good investment option.
Do you think term insurance is beneficial in real?
Term insurance is beneficial because it provides financial security to the family, but does not offer a financial return to the policyholder and provides benefits to nominees only after the policy holder’s demise.
There are ample benefits of term insurance plans, whereas the disadvantages of term insurance can make you rethink your decision for buying a term insurance plan. Every company provides different features in their term insurance, but they are similar in most aspects.
Here, we will discuss the Advantages and Disadvantages of term insurance. It will help you understand the positive and negative aspects of term insurance, and you can decide better whether you should buy one or not.
Advantages and Disadvantages of Term Insurance
Before jumping directly to the disadvantages of term insurance plans, let’s have a quick look at the pros and cons.
|Advantages of term life insurance||Disadvantages of term life insurance|
|The term insurance plans are cost-effective||Term insurance plans do not provide any return on investment.|
|They provide high coverage.||You need to pay a high premium if you buy at a later stage of your life|
|Term insurance plans are easy to buy||Term insurance does not provide you any financial assistance during your lifetime.|
|They offer a high surrender value||They don’t help you make money.|
|Term insurance plans come with tax benefits.||There is no cash value for the term insurance plans.|
You must be already familiar with ” what are the advantages of term life insurance “. Let us explain to you the disadvantages of term insurance in detail:
Disadvantages of Term insurance Plan
To date, you must have heard from people or policy providers regarding what are the advantages of term life insurance, but has anyone ever informed you about the disadvantages of term insurance? If not, here we are introducing you to the other side of the coin.
1. No Return on Investment
Many people use the term insurance plan as their investment portfolio, but they do not provide any return. While other investment plans offer you good returns, the only benefit that term insurance provides is family financial protection. So, term insurance plans are not an appropriate option for investment if you want returns and this is one of the major disadvantages of term life insurance for investment purposes.
2. Buying at the later stage of your life
If you plan to buy term insurance for yourself at a later stage of your life, i.e., after the age of 50, you need to pay high premiums for a higher sum assured, which is unfeasible for many people. They require a high sum assured, but fail to pay the high premiums. In such cases, either the policyholders overburden themselves to pay the high premium by forcefully stretching their budgets, or they compromise with the sum assured. This disadvantage of term life insurance makes it tough for many people to own term insurance.
3. No financial assistance during your lifetime
The major disadvantage of the term insurance plan is that it does not provide you any financial assistance during your lifetime. It is only the protection plan for your family after your demise. You can never make a partial withdrawal at the time of need or any return that other insurance plans offer.
4. No wealth generation
If you want to invest and create health by paying premiums, you will only get disappointment. It is also one of the primary disadvantages of a term insurance plan. Term insurance plans are no-profit plans that enforce you to pay a premium until the maturity or your demise.
5. No cash value
This is one of the major disadvantages of term life insurance. Term plan never offers you any cash value. Amount paid to the term insurance premiums doesn’t hold any cash value.
As per the records, It is clear that approx. 1% of the term life insurance plans ended in the death claim. So, the disadvantages of term insurance are also a considerable part of buying the plan.
7. Uncertainties of the plan
Once the term ends, your policy will stop providing coverage. If you wish to renew your policy after the end of the term, you might not get favorable conditions. Your increased age can cost you high premiums which many people fail to afford. You may become uninsurable during your term, making it difficult to qualify for the protection or get an affordable plan. This disadvantage of term insurance is faced by many people.
What are the Advantages of Term Life Insurance?
Besides some disadvantages of term life insurance, there are many benefits also. Term life insurance has numerous benefits, including live coverage and security for the insured. Besides these advantages, there are many other advantages such as:
- Simple: Term insurance policies are the easiest as compared to other life insurance policies like money back plans, endowment plans, etc. Other life insurance is the blend of saving along with savings. On the other hand, term life insurance is all about paying premiums and getting life coverage for the chosen term.
- Flexible: The term insurance plans are renewable and convertible. You can renew them without any medical check and convert them into an endowment plan for the same sum assured by paying an increased premium.
- Cost Effective: Term insurance is the most cost-effective and highly sought life insurance. You can get long-term life coverage for budget-friendly premiums. The premium rates of the term insurance are 6- times less than the other life insurance products.
- Tax Benefits: The term insurance plans offer tax benefits to the insured person. The term insurance premium is less and provides tax benefits under section 80 C of the Income Tax Act.
How to use the Term Insurance Plan?
Now that you have understood the disadvantages of term life insurance, it’s time to comprehend how to use term insurance policies to avoid the cons of the plans.
In case you have a tight budget, you must opt for term life insurance rather than permanent life insurance. Permanent life insurance can cost you more.
If you are the sole breadwinner in your family, You can secure very high death benefits with term insurance to protect the members dependent on you.
Best Term Insurance Plans in India
Although there are a few disadvantages of term life insurance, people still prefer them due to its numerous advantages. After understanding “what are the advantages of term life insurance and disadvantages of term life insurance”, let’s have a look at the best term insurance plans in India.
|Term insurance plan||Company||Life cover||Claim settlement||Premium price||Max Age|
|iProtect Smart||ICICI Prudential||Rs. 1 Cr||97.9%||Rs700/month||99 years|
|Click 2 Protect Life||HDFC Life||Rs . 1 Cr||98.66%||Rs. 772/ month||85 years|
|Smart Secure Plus||Max Life||Rs. 1 Cr||99.4%||Rs. 706/ month||85 years|
|Sampoorn Raksha Supreme||Tata AIA||Rs. 1 Cr||98.53%||Rs. 552/ month||100 Years|
|Smart-Protect Goals||Bajaj Allianz||Rs. 1 Cr||99.02%||Rs. 616/ month||85 Years|
|Mera Term Plan Plus||Pnb Met Life||Rs. 1 Cr||98.17%||Rs. 627 / Month||80 Years|
|Kotak e-term Plan||Kotak Life||Rs. 1 Cr||98.82%||Rs. 727/ month||75 Years|
|Total Protect Plus||Edelweiss life Tokio||Rs. 1 Cr||97%||Rs. 534/ month||100 Years|
|e-Term Plus Plan||IndiaFirst||Rs. 1 Cr||96.92%||Rs. 449/ Month||58 Years|
|Flexi Term Pro||Bharti AXA||Rs. 1 Cr||99.1%||Rs. 583/ month||99 years|
Term insurance plans are one of the best life insurance products available in the market. It provides you with many benefits in securing the future of your loved ones after your demise. Also, there are some disadvantages of term insurance plans that we have discussed in the article. Disadvantages of term insurance plans give you food for thought before buying term insurance. You need to understand what are the advantages of term life insurance and the disadvantages of term insurance to decide whether you should buy the term insurance plan or not.
Disadvantages of Term Insurance – FAQs
Can I covert my Term life insurance to an endowment plan?
Ans. Yes, you can convert your term life insurance into endowment plans easily.
Are the disadvantages of term insurance can wipe away your money?
Ans. No, the money you invest works as the protection for your family. disadvantages of term insurance never wipe out your money.
When there are disadvantages of term life insurance, why do people still buy them?
Ans. Besides the disadvantages of term life insurance, people focus more on its benefits because the advantages are more than the disadvantages of term life insurance.