Term Insurance

Term Insurance

Before understanding about Term Insurance, let us see what Life Insurance is.  Life Insurance is a contract between the insurer and insured where by the insurer promises to pay a certain sum of money to the insurer in case of death. Hence, insurance is a tool for sharing risk.

Term Insurance is a type of Life Insurance which is designed to secure the needs of your family in case of death or any uncertainty. Term Insurance provides coverage for a defined period of time, and if the policy holder expires during the term of the policy then death benefit is payable to nominee. Term Insurance being the purest form of insurance provides a specific amount of coverage for a specific period of time.

Term Insurance gives you more benefits for lesser premiums. The premiums in Term Insurance are low because there is no investment component in this type of insurance and the entire amount is used to cover risk.

The main objective of Term Insurance is to transfer the assets of the insurer to his/her heirs.  Term Insurance is also useful for debt payment and charity.

Here are some pros and cons of Term Insurance-

Pros of Term Insurance-

  1. Term Insurance is affordable.
  2. Term Insurance covers risk of death.
  3. Term Insurance is an effective tool for charity.
  4. Term Insurance is useful for debt payment.
  5. Term Insurance is cheaper than other insurance.
  6. The premium in Term Insurance remains the same regardless of the inflation.

Cons of Term Insurance-

  1. There is no survival benefit in Term Insurance.
  2. There is no cash value.
  3. There is no investment component in Term Insurance.


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