ADVANTAGES OF TERM INSURANCE:

Term insurance offers several benefits, making it a popular choice for financial protection. Here are the key advantages of term insurance:

1. Affordable Premiums

• Term insurance provides high coverage at a lower cost compared to other life insurance plans like whole life or endowment policies.

2. High Coverage Amount

• You can get a substantial sum assured (e.g., ₹1 crore or more) for a relatively low premium, ensuring your family’s financial security.

3. Financial Protection for Family

• If the policyholder passes away during the policy term, the nominee receives the death benefit, helping them manage expenses, loans, or future financial goals.

4. Flexible Policy Terms

• You can choose the duration of coverage, typically ranging from 20 – 80 years, depending on your financial goals and family needs.

5. Tax Benefits

• You can claim deductions under Section 80C of the Income Tax Act for the premiums paid. The death benefit received by the nominee is also tax-free under Section 10(10D).

6. Riders for Enhanced Protection

• Additional riders, such as critical illness cover, accidental death benefit, waiver of premium, and disability cover, can be added for extra protection.

7. Simple and Transparent

• Term insurance is easy to understand, with no hidden charges or investment risks. You pay premiums for pure life cover without worrying about market fluctuations.

8. Peace of Mind

• Knowing that your loved ones will be financially secure in case of an unfortunate event gives you peace of mind.

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DISADVANTAGES OF TERM INSURANCE

Term insurance is a great way to get high coverage at an affordable premium, but it does have some disadvantages. Here are the key drawbacks:

1. No Maturity or Survival Benefit

• If the policyholder outlives the policy term, there is no payout. Unlike whole life or endowment plans, term insurance does not provide a return on investment.

2. Premiums Increase with Age

• When renewing or buying a new term plan at an older age, premiums can be significantly higher. If you don’t buy early, it can become expensive later.

3. No Cash Value or Loan Facility

• Since term plans do not have an investment or savings component, you cannot borrow against the policy or withdraw money from it.

4. Limited Coverage Duration

• Once the policy term ends, coverage stops. If you still need life insurance after the term, you may have to buy a new policy at a much higher premium.

5. Medical Tests May Be Required

• Some policies require medical tests, and if you have pre-existing health conditions, you may face higher premiums or rejection.

6. Riders Increase Cost

• Adding riders like critical illness or accidental death benefits increases the overall premium, making the policy more expensive.

7. Inflation May Reduce Value

• The sum assured may seem sufficient today, but due to inflation, its value may decrease over time, making it less effective for future financial needs.

8. Claim Settlement Conditions

• Some policies have strict terms and exclusions, which might lead to claim rejections under certain circumstances.