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Term Insurance Policy: Advantages and Disadvantages
With the rise of economic fluctuations and detrimental illnesses, insurance policies have become a precautionary shield for the public. People have become intuitive about future income, smart investment plans, and secured monetary returns to income. Term insurance is one segment under the roof of insurance policies. There has been continuous swelling of life insurance policies in difficult times. It is very requisite to choose and buy term plan that meets your requirements.
Term insurance gives the benefits of long-term savings, death benefits, and secured income for a family. In the tech-savvy world, buying a policy is just a few clicks away. One may opt to buy term plan online comparing the plans on various portals.
Advantages of Term Plans
- Flexibility
One may buy a term insurance plan with good flexibility. It is both renewable and convertible. You may extend or renew the policy without any medical examination after the termination of the first policy. With a hike in the premium, the term policy can easily be converted into an endowment policy of the same sum assured. It is also effortless to opt-out of the policy. Once you stop paying the premium, your coverage will be ceased, thereby ending the policy. There is no pay-out or financial loss like an endowment plan where one cannot recoup the savings without financial deductions.
- Cost-Effective
Long term insurance has an economical price. As compared to other life insurance policies, they are far more cost-effective. Buy term insurance and avail the benefit of huge life coverage to paying budget-friendly premiums. The premium for a term insurance policy is almost six times lesser than any other life insurance policy. Moreover, the premiums are locked in the duration of the plan. The total premium paid when you buy a term plan young is lower than what you purchase later in life.
- Tax benefits
Section 80C of the Income Tax Act gives beneficial tax saving options. It offers deductions of up to INR 1.5lakhs for listed investments. Under this section, the premium paid is also entitled to deductions. However, the yearly premium should not exceed 10% of the coverage amount.
Under Section 80 D of the Income Tax Act, the policyholder who has taken health-related rider can avail tax benefit. With the term insurance policy, one can avail deductions of up to INR 25000.
Under Section 10(10D), the assured sum received on maturity or death of a policyholder is completely exempted from taxes.
Disadvantages of Term Policy
- Term insurance is not a policy for those who aspire to save for future needs like marriages, education, retirement, or others.
- A term Insurance plan does not enable you to create wealth. They have no profit plans and hedges against inflation.
- If the insured outlives the policy period, no monetary benefit would be given. The policy builds no cash value.
- No surrender values or loans are given in term insurance policy.
The Bottom Line
Term plans are the purest and most cost-efficient type of plans. It is quite convenient to buy term insurance online as well. Therefore, you should wisely choose the plan considering your income, liabilities expenses, etc.
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