Term Insurance – Pros and Cons

Term Insurance - Pros and Cons

A term insurance plan is an insurance product, which is designed to provide financial security to your family members in case of an unfortunate event. The main aim of a term insurance plan is to provide a life cover without incurring any additional charges for features, which involve investment or tax saving. With term insurance, you get a cover for life at a low premium. Understanding term life insurance pros and cons will help you make the right decision.

Advantages of Term Insurance

• If you need life insurance for a specific period of time, a term insurance plan is ideal for you. A term insurance plan provides a cover for 85 years and it will save you a lot of money. You will not have to invest in other life insurance plans if you have the right term insurance.

• One of the biggest term life advantages is the low premium amount. Most insurance plans come with a mortality charge, which pays for the death benefit. If you want to maximize the death benefit with minimal investment, a term plan is the best option for you.

• When you buy term plan online, you pay low upfront charges. In the case of non-life insurance policies, the premium will increase with each passing year and the mortality charges will increase. However, in case of a term plan, the premium amount will remain the same and you will receive higher coverage without incurring any additional cost.

Disadvantages of Term Insurance

• One of the biggest term life disadvantages is the limit on the coverage. It is difficult for you to estimate the period of time, for which you will need the insurance. It is not possible to predict the future or think about your financial condition over the next 20 to 30 years.

• In the case of term insurance, there is no build-up of capital. Many people like to see their wealth growing with their life insurance but this does not happen when you buy term plan online. Most policy owners outlive the contract and only about 1 percent of the policy is paid out. It does not help accumulate or grow your capital.

• Another term life disadvantage is its inflexibility. The coverage terms and the benefit will be set and there is no option to change the premiums at a later stage. Your income might rise and fall but you will not be able to make changes to the term insurance plan you have invested in. You might miss the hit while trying to predict the cost of living 20 years from now.

You need to identify the annual expenses of your family in order to determine the assured amount on the policy. Understand the term insurance pros and cons before you invest in a term insurance plan.

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