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People buy life insurance to ensure their families remain financially secure in case of an untimely event. Life insurance is the best way to provide financial security for your beneficiaries and also act as a savings or investment tool for policyholders. But what happens if the insurance plan matures without any such occuring?
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The maturity benefits in term insurance refers to the life assured receiving the lump sum benefit amount when the policy reaches its maturity, if he/she outlives the policy term. The maturity benefit you receive depends on the type of life insurance policy you buy and its T&Cs. Having a maturity benefit in your life insurance plan may slightly increase your premium, but the long-term benefits can be worthwhile. The money received at maturity can help you achieve your long-term financial goals such as funding your child's education, planning for retirement, or purchasing a home.
Let’s understand this with Kamal’s example:
He purchased a term insurance plan with return of premium option that offers maturity benefits and a term of 15 years. Fortunately, he survived the policy term and the term plan matured at the end of 15 years. Because of this he became eligible to get the maturity benefits from the term plan and he used his money to increase his professional career.
Term Plans
The amount you receive at the time of policy maturity depends on the type of plan chosen. Let’s understand some types of life insurance plan that offer maturity benefits of different types:
If you are seeking an affordable term plan with maturity benefits, a Term Insurance with Return of Premium (TROP) plan can be a right option. Pure term plans offer protection and there is no savings element in this. Thus, they are comparatively affordable.
With the TROP feature, you can get a refund of all the premiums paid (minus applicable deductions) when you survive the term plan maturity. Premiums for a term plan with return of premium features are quite higher than a pure term plan. You can calculate the premium rate using a term insurance premium calculator.
One major term insurance tax benefit is that the maturity benefits are exempted from taxation u/s 10(10D) of the Income Tax Act, 1961.
Endowment plans are life insurance plans that include a savings component. The premiums you pay for endowment plans provide both life coverage and accumulate savings, which grow into a larger corpus over the policy term. At maturity, the policyholder or nominee receives the accumulated wealth.
Premiums up to Rs. 1.5 lakhs per year paid for endowment plans are deductible u/s 80C of the Income Tax Act, 1961, subject to specified T&Cs.
If you are looking for a life insurance plan with maturity benefits in the form of market-linked returns, then ULIPs might be the ideal choice for you. These insurance plans offer both life insurance coverage and investment opportunities within a single plan. With ULIPs, you can choose to invest in equity, debt, or a combination of both. Your investment's risk level depends on the asset class you select.
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Along with the life insurance maturity benefits, there are other benefits that can you have with life insurance, such as:
Extra Financial Protection: To enhance financial protection for yourself and your loved ones, you can opt for riders. These add-ons, such as critical illness riders and waiver of premium riders, are available with life insurance policies that include maturity benefits. They can be added by paying a nominal additional premium and offer extra financial compensation if a covered event occurs during the policy term.
Back up for your liabilities: While you are earning, you can manage the EMIs on your debts. However, if you pass away, this liability can burden your loved ones. The sum assured from a life insurance plan can help them handle such liabilities effectively.
Peace of Mind: Knowing that your loved ones will have financial security even in your absence brings peace of mind.
Wrapping It Up!
Purchasing a life insurance plan with maturity benefits enables one to enjoy the life cover for a given period and also maturity benefits at the end of policy term on survival.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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