What are the Pros and Cons of Term Life Insurance?


Given the increasing vulnerability of life, insurance has become more of a necessity than a choice. But choosing the right policy can be a daunting task. That said, going by popularity, a term plan is highly coveted for more reasons than one. It is a pure and simple form of assurance. It guarantees payment of a definitive death benefit, in case of the demise of the insured in the specified term. While the policy offers a multitude of advantages, it is critical to evaluate its suitability by weighing the disadvantages too.

Here is a look at the pros and cons of a term plan:

Pros of term life insurance

  1. Term policy is more cost-effective than other insurance plans: Term insurance is the most economical life insurance policy. It allows the insured to avail substantial coverage at very reasonable premium rates. One can use term insurance premium calculators online to determine their policy premiums.
  2. It offers pure life cover without any complications: A term plan is a straightforward plan that offers pure life coverage in return for premiums paid. It is simple to understand and does not include complicated options.
  3. The term insurance policy is seamless and flexible: An insurer can opt-out of a term insurance cover whenever desired, without any hassles. Additionally, it also provides flexibility in terms of renewability. The insured can continue an existing policy further without any medical examination. It also allows one to increase the coverage with rising personal needs.
  4. Term plans are highly effective to support temporary financial needs: A term policy is an amazingly effective solution for temporary needs such as covering a home loan. Also, it is suitable for people who need coverage for less than ten years. It has exceptionally low up-front costs, allowing insurers to get considerable coverage at low premiums.
  5. Term insurance premiums and maturity amount is exempted from tax: The Income Tax Act of 1961 allows two-fold benefits for term insurance plans. Under Section 80C of the Act, the premium paid for a term insurance plan is exempted from tax up to ₹1.5 Lakhs. On the other hand, as per Section 10(10D), the benefit received at maturity, for Term Return of Premium Plan (TROP), is also exempted from taxation.

Cons of term life insurance

  1. Term plans do not offer any cash value: A term life cover is structured only to provide a death benefit and not a return on the investment. The premiums only serve the purpose of providing financial assistance to the family in the absence of the insured. There is no benefit paid if the insured outlives the term.
  2. The policy only provides coverage for a limited time period: Since a term policy offers protection only for a specified term, it becomes harder to get comprehensive coverage. The future is hard to predict, which makes it is difficult to select an appropriate period of cover. However, an estimation based on general life expectancy can be made to ensure more exhaustive coverage.
  3. The percentage of premium increases every year corresponding to age: Term insurance covers offer escalating premiums with each passing year. With increasing age and health risk, the premiums paid increase. However, this is similar in all other insurance products and can be reduced to a bare minimum if the policy is purchased at a young age. 


Overall, a close look at the pros and cons establishes that the advantages of term insurance plans far outweigh the negatives. Rely on trusted insurance companies to get the desired term plan and guarantee valuable financial security for your family.