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The pandemic has been a wake up call for most who have not created a solid plan for their future. Many have started reconsidering investing in insurance products to hedge against the possible uncertainties of the future. Life insurance is the first thing that comes to most people's minds while considering the financial safety of one's family. That is because either they have not heard or understood the concept of term insurance. In this blog, we will try to figure out what term life insurance is and examine its positives and negatives and finally come to a suitable conclusion.

What is Term Life Insurance?

Term life insurance is a specific type of insurance product that covers the risk of the policyholders and or the people covered under the policy for a pre-specified period of time. For example, if the term life insurance stipulates that the policy cover is valid till you turn 65 years then the people covered under the policy will enjoy its benefits until the policyholder turns 65 years. The insurance policy is not valid when the insured surpasses the specified age limit in the contract.

How is Term Life Insurance Different from Whole Life Insurance?

Term life insurance, as the name suggests, will cover the policyholder and his family for the pre-specified term or age inked in the contract whereas whole life insurance covers the policyholder and their family throughout the policyholder's lifetime unless mentioned otherwise.

The financial benefits of term life insurance expire when the term limit or the age limit of the contract ends whereas in the case of whole life insurance there are no defined limits on age or tenure, the benefit extends to the policyholder's lifetime.

The sum assured amount is way higher than what is available in whole life insurance for policies with similar insurance premiums. This ensures higher financial stability and well being if the policyholder dies within the pre-specified term period when compared to whole life insurance.

Most term insurance providers allow their customers to convert their term insurances to whole life insurance at a later stage but no such benefits are extended to whole life insurance policyholders if they wish to convert their insurance to term life insurance or any other insurance product. Choose your insurance investment opportunities accordingly.

What are the Main Advantages of Term Life Insurance Policy

There are many advantages of buying term life insurance but some of the most notable ones are being explained below: 

Affordability

Term insurance policies are considered some of the most affordable life insurance products available for purchase in the UAE. There are different types of term insurance policies that are targeted at different sections of society, offering everyone who wishes to be insured a chance to buy one. In comparison, whole life insurance policy premiums can be as high as 6 times that of term life insurance policies. This is probably why more and more people are opting for term insurance Dubai. 

Simplicity

One of the biggest advantages of a term insurance policy besides affordability is its simplicity. The terms and conditions of these insurance policies are simple and straightforward, there are no ifs and buts in the agreement that might confuse the buyer. If the policyholder dies then the sum assured will be paid out to the dependents, no further questions asked. The entire process is very transparent and easy to complete. 

Portability

Term insurance cover can transcend geographical boundaries. In case the policyholder decides to permanently move out of the UAE, he/she is still covered by the plan as long as the policy premium is paid promptly. In the unfortunate case of the policyholder's demise, the family can still claim the sum assured and transfer it to the country of their choice. 

Drawbacks of Term Life Insurance

As is the case with any product, term life insurance policies do come with their unique set of drawbacks, some of the biggest drawbacks of term life insurance are mentioned below: 

No Maturity Benefit

One of the biggest drawbacks of term life insurance is that it does not offer maturity benefits to policyholders. Most life insurance policies offer a combination of sum assured and bonus to the policyholder when he/she services the tenure of the policy. All the information with regards to the same is available in the policy document.

The benefit from term life insurance can only be enjoyed by the family of the policyholder at the unfortunate demise of the policyholder before the term period. 

Premiums Might Shoot Up with Age

When the term insurance expires and the policyholder is in search of a new insurance policy he/she will have to settle for a higher premium price to acquire a new policy. As people get older the premium of life insurance policies goes up. When a person buys a life insurance policy in their early 20’s the premium that he/she has to pay would be very small when compared to someone who is looking to buy a life insurance premium in their early 40's.

To conclude, choosing a life insurance policy is a personal choice as the requirements of each policyholder is different. Buying a life insurance policy is a very important decision hence considerable research needs to go into understanding and analyzing the suitability of each policy.

Term Life Insurance is a great option that only a few people have heard of, but it is certainly a great option for people who are looking for financial security at a nominal price range.