Exploring the
Pros and Cons of Term Insurance
  • Understanding Term Insurance
  • Advantages of Term Insurance
  • Disadvantages of Term Insurance
advantages and disadvantages of term insurance in india
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Advantages & Disadvantages Of Term Insurance

There are various questions that arise in one’s mind while looking out for insurance policies that best suit our as well as our family’s needs. When it comes to financially protecting your family in your absence, the simplest and best option is term insurance. Now, the questions that may come up in your mind are, what exactly is term insurance? Would opting for a term insurance plan prove beneficial? What are the disadvantages or the risk involved and more. In order to get the best plan, it is essential to know everything about term insurance plans.

Cover your Family by term insurance Cover your Family by term insurance

What Is Term Insurance?

Term insurance is the most basic form of life insurance that provides financial protection by offering a large amount of life cover i.e. sum assured at a comparatively low premium rate. In case of the insured's death during the policy term, the amount is paid to the nominee. A term insurance policy, as the name suggests, is an insurance policy for a specific term or period of time. It helps cover expenses incurred by your loved ones in case of your sudden demise.

Advantages of a Term Insurance Plan

Term insurance has a lot of advantages to offer which makes people want to opt term insurance for them. Following are a few benefits of having term insurance:

  1. Cost-Effective Plans

    Term insurance is one of the most inexpensive life insurance plans available. The premiums paid on these policies are much lower and affordable as these policies do not offer the investment component.

  2. Easy Buying Process

    Term insurance is a very popular insurance policy that everybody is aware of and since the reach is high, it is accessible to anyone and everyone with the click of a finger. One can either buy the insurance policy directly from the desired company or opt for trustworthy web aggregators who will help you find a suitable term plan.

  3. Flexibility

    One of the benefits of term insurance is flexibility in choosing when you want to pay your premiums. Term insurance offers you a range of options when it comes to paying your premiums. One can pay them monthly, quarterly or yearly as well, depending upon their comfort.

  4. Staggered Claim Payout

    Under this, the insured or the policyholder can decide if the sum assured which would be paid to the nominee after his/her death would be paid in a lump sum or in parts. This is a major advantage for policyholders if they don’t want the insurance company to pay out the sum assured in one go. They can easily set a time frame such as monthly, quarterly or yearly payouts to make the nominee's life a lot easier and more stable.

  5. Add-on Riders

    Under term insurance, one can opt for additional riders such as Critical-illness riders, Accidental death benefit riders and more along with term insurance. These additional riders help give that extra coverage which might be needed by some of the policyholders at an additional cost.

  6. Tax Benefits

    Having term insurance offers the policyholder with tax benefits under 80C of the Income Tax Act, 1961. The insured can get a rebate of up to 1.5 Lakhs on the premium paid. On top of this, under section 10(D)D even the payout (sum-assured) has tax exemption if it is ten times the premium that was paid.

Term Insurance Companies

Disadvantages of a Term Insurance Plan

Just like advantages, term insurance plans and policies have certain disadvantages as well. The following are certain disadvantages of the term insurance plans:

  1. The premiums depend on age

    The premiums for term insurance depend on the age of the policyholder, the older the policyholder the more the premium. So if a person wants to opt for term insurance at a later stage in life, they would have a disadvantage as the premiums would be higher.

  2. No Investment

    Certain insurance policies offer maturity benefits such as bonuses and more, but under term insurance, there is no such option. Term insurance is a protection plan that only offers death benefits and under some plans offers survival benefits as well. It cannot be used as an investment instrument.

  3. Surrender Value

    The policyholder of term insurance can stop the term insurance at any time. If the insured stops paying the premiums, the policy automatically comes to an end. The surrender value, however, may vary depending on the insurance company. Not all companies will offer you surrender value.


Now that everything is covered and all pros and cons are laid straight, choosing insurance would be comparatively easier. Term insurance has certain drawbacks but it has a lot more advantages when compared to disadvantages. Protecting the family financially during one’s absence is one of the most important decisions that you would be taking. It is essential to opt for a term insurance plan that best suits your needs as soon as possible cause buying it at a later stage would only cost you extra money.

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Naval Goel

Reviewed By : Naval Goel

Naval Goel is the CEO & founder of PolicyX.com. Naval has an expertise in the insurance sector and has professional experience of more than a decade in the Industry and has worked in companies like AIG, New York doing valuation of insurance subsidiaries. He is also an Associate Member of the Indian Institute of Insurance, Pune. He has been authorized by IRDAI to act as a Principal Officer of PolicyX.com Insurance Web Aggregator.