What Are The Disadvantages Of Term Life Insurance?

Term insurance is the most basic type of insurance that covers an individual’s life. It features death benefits and financial protection for the beneficiary in case of the insured's death. However, despite having a range of benefits, there are a few disadvantages of term insurance policies that we are going to discuss here. ...read more

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What is Term Life Insurance?  

Term insurance is a type of life insurance that provides life coverage for a specific period. The insured pays a premium. In return, the insurance company guarantees a death benefit for the beneficiaries of the policyholder in case of the latter’s death. 

This sum provides financial security to the insured’s family and takes care of all their day-to-day and future expenses. 

However, it’s also crucial for you to be aware of the disadvantages so that you can understand if it meets your future needs or not. 

Disadvantages of Term Insurance

Some of the disadvantages of a term policy are as follows —

  • No Investment 

Term plans don’t have an investment component — they only offer death benefits. Unlike certain life insurance plans featuring investment opportunities, basic term policies don’t offer additional bonuses along with sum assured.

  • No Financial Support if You Outlive the Tenure

One of the biggest cons of term insurance for many is that if you outlive the term life insurance plan, there will be no benefit for you. If you are alive at the end of the tenure, the policy will simply lapse. 

  • Expensive for Aged People

Term life plans are usually worth buying when you are young. With age, the policy premiums get expensive and it would be hard for you to get extensive coverage. 

To get the best coverage at affordable premiums, it’s recommended to purchase a term life policy when you are young. 

  • No Cash Value 

Another one of the top disadvantages of term insurance is that it doesn’t have a cash value or surrender value. Term plans only provide a death cover if the insured dies during the policy tenure — there’s no accumulation of amount for savings and investments. 

So if you plan to surrender the policy before maturity or take a loan against it, it’d be better to get a life insurance policy. 

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