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The uncertainty of life can be troubling when you look at the smiles and cheer of your loved ones. You want them to be happy and secure always, even when you are not around. For this purpose, it is important to create a sound financial plan for the future. A crucial part of your financial plan is buying a life insurance policy to ensure your family's financial safety and well-being. Securing their future for when you are not around can give you a sense of relief and satisfaction today.

One such life insurance product is term life insurance.

A term insurance plan is one of the simplest and oldest forms of life insurance policies. A term plan is a pure insurance policy that pays out a defined sum in case of an unfortunate demise of the policyholder during the plan tenure. Term insurance plans have no savings component.

Here are some of the advantages and limitations of term life insurance plans:

Advantages of Term Insurance Plans

• Inexpensive: Designed to fit your finances, term insurance plans are an affordable solution that aims to provide substantial insurance coverage. Term plans come at economical premiums that do not strain your finances. The premiums of term life insurance plans are lower than other insurance policies. Hence, term insurance policies give you a large sum assured at much cheaper premiums than other life insurance policies.
• Comprehensible: Term life plans are not complicated and are easy to understand. Term insurance is the perfect choice for individuals that need a pure life insurance policy to safeguard their families against uncertainties in the future.
• Reliable financial security: A term insurance plan will financially protect your family in your absence. The death benefit received by your family can help them meet their living expenses and fulfil their financial goals in case of your death. Moreover, term life insurance benefits can help your family pay off pending liabilities like mortgage loans, car loans, etc.
• Flexible and adjustable: Many term insurance plans give you the benefit of switching from a term plan to an endowment policy for the same sum assured with the associated increase in premium. If and when your term gets over, you can renew your policy for another term period. Term insurance plans also allow you to customise the plan as per your needs. You can easily enhance the coverage of your term insurance by opting for additional riders such as permanent and total disability cover, accidental death cover, terminal illness cover, etc.

Limitations of Term Life Insurance

Term life insurance policies come with few drawbacks, such as:

• Increase in premiums: The premiums for term life insurances increase as you grow older means when you purchase it at older age. Also, few companies do not provide term life insurances to people above 60-65 years. Therefore, buying a term life plan in your 20s or late 20s can provide the desired financial coverage without burning a hole in your pocket.
• No savings component: A term life insurance supports your family in an unfortunate event such as your demise. But it has no savings component. Hence, it is unsuitable for any other needs like travel, retirement plan, etc. However, a term insurance plan is a secured and reliable plan that provides guaranteed financial support to your family in your absence.
• No creation of wealth: Term life insurance is a weak investment vehicle. These plans are pure protection insurance policies and do not provide any cash value. It only assures death benefit. You cannot grow wealth through a term insurance plan; it doesn't produce any income or tends to the capital needs of the family while you are alive.

Even though term life plans have some drawbacks, the advantages they offer significantly outweigh the disadvantages. Overall, term life plans offer the much-need financial security in unprecedented times, such as today. When you invest in sound term life insurance, you can be at peace knowing that your loved ones will not struggle financially even when you are not around.

Disclaimer:

The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision. Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details

PNB MetLife India Insurance Company Limited
Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
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