Several people disregard the term plan due to the no visible monetary benefits, especially in the case of survival. Is this the only gauge to measure the value of a term plan? What about the riders in insurance? Don’t they increase the value of a term plan?
If you have trouble deciding if term insurance is or not, your doubt is legit. Below is detailed information regarding the advantages and disadvantages of a term plan. It will help you understand the usefulness of a term plan and whether you should buy one.
Advantages of a Term Plan
Given below are the major advantages common in most term plans.
Easy to Understand
The framework of a term plan is so that it has simple underwriting and even simple policy terms and conditions. The IRDAI instructs every registered insurer to have such easy-to-understand term plans, also known as Saral Jeevan Bima Yojana.
The term plan has one of the lowest premium rates compared to any other insurance plan.
Assured Returns During Policy Term
The validity of the term plan ends after the term end. But, if anything happens to the policyholder during the policy term, the insurer guarantees assured mortality returns to the nominee.
Longer Coverage Duration
Usually, regular life insurance plans cap the maximum age for coverage at 85 years. But term insurance can provide coverage for up to 99 years.
Critical Illness Cover
Critical illness riders in insurance allow policyholders to use term plans as health insurance. Thus, they don’t need separate health insurance for health complications due to the costly diseases.
Accident and Partial Disability Covers
The riders in insurance also include accident and partial disability cover. These become very useful when the policyholder meets with an accident and has no other source to pay for the treatment and following expenses.
Terminal Illness Returns
The plan is also useful when the policyholder starts suffering from a terminal illness mid-term. The insurer disburses the entire assured sum to the policyholder in such cases.
Several Pay-out Options
Term plans have multiple pay-out options: one-time settlement, monthly income, and partial settlement + monthly settlement.
Disadvantages of a Pure Term Plan
Given below are the major disadvantages common in term plans.
No Savings or Investment Potential in Case of Survival
If the policyholder survives the policy term, they don’t get any return of premium or maturity benefits. So, there is no savings or investment potential in term plans.
Low Tax Savings
Due to the cheap premium rates, the tax savings capacity is also very low
Higher Minimum Age to Purchase Term Insurance
The minimum age to get a term plan is 18. It is a disadvantage if you wish to have a policy for the children in your family.
No Loan or Withdrawal Facility
Term plans don’t provide a loan or even a withdrawal facility to the policyholders.
Results After Comparing the Advantages and Disadvantages of Term Insurance
The number of advantages is more than the disadvantages, so insurance seems advantageous from the primary inspection. So, they are valuable plans that become useful in time of need.
But even if the disadvantages bother you so much, you should remember one thing. The premium of term insurance is too low. You can easily buy a 1 crore term plan for monthly premiums as low as 600. This amount is less than what you spend on a meal with your family at a restaurant. So, if you get such high coverages with such a negligible price, why shouldn’t you grab the opportunity?
The advantages outnumber the disadvantages, and the conclusion shows how term plans are indeed beneficial. So, based on this, you should buy a term plan if you haven’t got one yet. It will help you, in the long run, to protect your family against financial adversities in your absence.