Term Life Insurance Quotes and Rates/ No Medical Exam

Advantages, Limitations and Uses of Term Life Insurance Policy

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Details about Term Life Insurance Policy

Term insurance is a type of insurance that gives cover for certain period of time. Even if the person dies during the time period mentioned in the policy and policy is active then the death benefit is paid. Term life insurance, like other insurances, have advantages as well as limitations. Following are some advantages of term life insurance:

Flexibility

In policies, other than term insurance, if person stops paying premiums in middle, there is financial loss as one cannot get savings portion of the policy without some deductions. Here, in term insurance if you stop paying premium mid terms, the risk cover stops and policy ends. In this case nothing is payable to you as there is no savings element in the policy.

Term life policies are renewable and convertible. Policies are convertible which means you can convert your term life policy to endowment policy for the same amount. Policies are renewable which means one can opt another term policy without a medical exam.

Simplicity

Unlike other insurance policies, term insurance plans are easy to understand. Plans that involve risk cover and savings component together are called cash value plans. For common man it is not always easy to evaluate the actual amount he is investing as savings. This fact makes planning difficult. Where as, term life policies are simple and easy. Person has to pay the premium and get cover for the term which is chosen.

Tax Benefits of Term Life Insurance

In term insurance policy not only the premium paid is less but one also gets benefit of u/s 80C. The money saved by paying less premium can be invested in other tax schemes like PPF and more.

Competitive Pricing

Term life policies, as told earlier are easy to understand and simple too. With term insurance, one has fewer information problem which makes this policy more price competitive.

Lowest Premiums

The premium paid in term policies are much lower as compared to other insurance policies. Hence person can secure his future as well as save money by investing in term insurance policy.

Limitations of Term Policies

Below are few limitations of term policies :

  • Term policies are without any profit plans and hence do not provide any safety against inflation.
  • No loans are available for term policies.
  • The insurance needs at higher age cannot be met with term insurance as premium increases with increasing age.
  • Term policies do not provide income to your family when you are living.
  • Company do not provide term policies at age higher than 65 or 70. Even if they provide some term policies at this age there are quite disadvantages attached.
  • Person cannot create wealth through this type of policies.

Uses of term Policies

  • Term policy is good for person who has less income but requires a large cover to protect his family.
  • Person who has less budget can opt for this type of policy easily.
  • Person can buy term policy instead of cash value policy and save money. This saved money can then be utilized in ones business or career.
  • If a person has taken large amount of loan then buying term policy is suitable for him.
  • Term policy is the most inexpensive method to provide financial security to domestic servants. Similarly, employer can use this policy to provide cover to their employee at low cost.
  • Term policy can be used to secure future from insurability.
  • Term policy is the cheapest way to safe your future income from risk of your demise before even you have earned it.

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