Is Term Insurance Worth It? Term Insurance Good or Bad Explained

Written by : Knowledge Centre Team

2025-12-24

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Life is utterly unpredictable. It may be vulnerable to a severe disaster or serious illness that could affect your financial stability immediately. When your household's only or major source of income suddenly passes away, the family members may go through a severe economic crisis, further increasing the emotional pain. Having appropriate support helps the family cope with the financial stress; however, it requires the dependents' savings to be sufficient to cover all of their demands in terms of money.

A term insurance plan may be helpful in such situations. A term plan is a type of life insurance where, in case of the policyholder’s untimely demise, a specific sum is paid to the insured person’s family by the insurance company. Under the term plan, a fixed time and sum assured are always specified.

A term insurance policy ensures financial security and helps the family members cope with monetary hardships. The amount total granted by the insurance company helps the dependents pay off any debts left behind by the deceased person and live life comfortably.
But is term insurance good, really? Let's delve further into the blog and find out - Is it worth buying term insurance?

Key Takeaways

Term insurance provides a lump sum payout to your family in case of your untimely demise, helping them manage expenses, debts, and future financial needs.
Term plans offer substantial coverage at low premiums, making them a cost-effective way to secure your family’s future.
While term insurance doesn’t offer returns, it serves as a crucial safety net, ensuring financial stability for your loved ones.
Additional riders like critical illness cover enhance protection, while tax benefits under Section 80C and 10(10D) add financial advantages.
The younger you are, the lower your premiums. Buying early helps lock in affordable rates and ensures uninterrupted coverage.

What is Term Insurance?

Term insurance is a pure life insurance product designed to provide financial protection to your loved ones in case of an unfortunate event. It offers a high sum assured at affordable premiums, ensuring that your family remains financially secure even in your absence. Unlike traditional life insurance policies, term plans focus solely on providing life cover without an investment component.

Many individuals ask, "Is term insurance good?" The answer depends on your financial goals. If your priority is securing your family's future against uncertainties, term insurance is an excellent choice. It guarantees that your dependents receive a lump sum payout in case of an unfortunate event, helping them manage expenses, loans, or daily living costs.

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Is it Good to Buy Term Insurance?

The answer to whether term insurance is good or bad is pretty straightforward. Buying a term life insurance plan is a prudent decision. In fact, it has become a crucial investment as it ensures a safe and protected financial future for you and your loved ones. When an insured person unexpectedly passes away, a term plan provides insurance coverage to the policy's nominee or beneficiary. This is also referred to as the ‘mortality benefit.

Advantages of Buying a Term Plan

Buying a Term Insurance Plan is the most reliable way to ensure you and your family have enough financial protection to deal with life's challenges.

Here are some of the reasons why buying term insurance is good:

Huge Sum Guaranteed with Economic Premium: A term insurance plan is the simplest and purest type of insurance policy. Its capacity to be cost-effective is by far its most significant advantage. A term plan has a low premium compared to most other life insurance policies.
However, you should invest money in a term plan at a young age. The primary justification for investing in a term plan early is that the earlier you begin, the lower the premiums you will have to pay and the greater the coverage amount.

Terminal Illness Cover: Anyone can experience a severe sickness at any time. The costs of medical care associated with these severe illnesses could swiftly deplete a person's finances. As a result, it is crucial to be financially prepared for such circumstances.
Let's say you were just told you have a severe illness, or you fear you might in the future because of your family's medical history; in that situation, selecting terminal illness coverage on your term plan is always advised. Adding this cover to a term plan is typically recommended because it is readily available with a term plan for a minimal premium increment.

Tax Benefits: A term plan offers tax benefits under two other sections of the Indian Income Tax Act 1961. A buyer of a term plan will be entitled to Section 80C tax exemptions on the insurance premium amount. In addition, if you hold a term plan, it qualifies for exemptions from the Return of Premium Plan (TROP) and maturity benefits under section 10 (10D).

Additional Rider Advantages: Purchasing a term plan might give you access to various additional rider advantages. To reinforce your term plan, you can easily choose a rider and add it for a minimal premium increase. You must remember that these extra rider advantages can differ from one insurer to another. Therefore, before making a wise choice, it is always advisable to review all the terms and circumstances about the additional rider advantages listed in the policy.

Also read: Riders in Term Insurance Plan

Disadvantages of Term Insurance

While term insurance is a valuable financial tool, it does have some limitations. Understanding these drawbacks can help you make an informed decision about whether this plan aligns with your long-term financial needs. Some of them are as follows:

No Maturity Benefit: One key downside of term insurance is that it does not offer any maturity benefits. Unlike endowment or investment-linked policies, if the policyholder survives the policy term, there is no payout. This can make some people wonder, "Is term insurance good for wealth creation?" While it doesn't build savings, its primary purpose is to provide financial security, making it a crucial safety net rather than an investment vehicle.
Premiums Increase with Age: Another factor to consider is that term insurance premiums increase as you age. If you buy a policy early, you lock in lower premium rates. However, if you delay your purchase, you may have to pay significantly higher premiums due to increased health risks. This is why financial experts often recommend getting term insurance at a younger age to enjoy cost-effective coverage.
Policy Lapses if Premiums are Missed: Term insurance requires regular premium payments to keep the policy active. If you miss payments, the policy may lapse, leaving your family without coverage. While some insurers offer a grace period, failure to pay within this timeframe can lead to policy termination. To avoid this risk, consider setting up auto-debit or timely reminders for your premium payments.
Limited Investment Component: Unlike savings or Unit-Linked Insurance Plans, term insurance does not provide any investment or wealth-building benefits. If you're looking for a product that offers both protection and investment, you may need to complement your term plan with other financial instruments. However, if your primary goal is life coverage at an affordable cost, term insurance remains one of the best options available.

Conclusion

Thanks to the wide range of term plans available in the modern market, people can buy one that meets their criteria and needs. Policies like the Canara HSBC Life Insurance iSelect Smart360 Term Plan are a good choice because they include a low premium rate, flexible premium payout option, comprehensive coverage, and an option for consumers to have their spouse as an additional beneficiary.

Glossary:

Term Insurance Plan: A life insurance policy that covers a specific period. The beneficiaries receive a death benefit if the policyholder dies within the term.
Sum Assured: A predetermined amount of money that the insurance company pays to the beneficiaries if the policyholder dies during the policy term.
Premium: The amount the policyholder pays to the insurance company in exchange for coverage.
Nominee/Beneficiary: The person designated to receive the death benefit from the insurance company.
Rider: An optional add-on benefit attached to a term insurance policy for an additional premium.

FAQs on Term Insurance

Term insurance plans generally provide coverage for death by all causes except for suicide.

There are various payment options available for a life insurance premium. The premiums can be paid monthly, quarterly, half-yearly, or annually, based on the time and cost that suits you the best.

The premium amount is not refunded at the time of payout if the return of the premium is not a part of your term insurance. The only time you will get the return of premiums is if you have paid for them in the first place during policy tenure.

Yes, absolutely. People get term insurance money if the insured person dies during the policy term. The death benefit is paid to the designated beneficiary.

No, you don't get money back from a basic term insurance policy if the policy term ends without a claim. Term insurance is pure protection, so it pays out only in case of death during the coverage period. There are some variations of term insurance, called Return of Premium (ROP) plans, that will return some or all of your premiums if you outlive the term, but these typically come with a higher premium cost.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.