This article talks about the maturity benefits that you need to know before buying a life insurance policy.
The primary objective of buying life insurance is to protect your family members during unfortunate times such as death or disabilities of the policyholder which leads to loss of family income. There is a high possibility that no unfortunate events take place during the term period of the life insurance. In this case, will the premiums paid by policyholders be paid back to them or not. Although no payback on maturity is provided under traditional term life insurance policies, you may opt for life insurance policies with maturity benefits. The majority of people are unaware of the maturity benefits offered by life insurance and thus are unable to take advantage of it.
What is meant by Maturity Benefits?
Maturity benefits refer to the claim that the policyholders have once the insurance policy matures. Insurance policies with maturity benefits pay out a lump sum amount on the maturity of the policy. The only precondition to claim this lumpsum amount is the thorough continuation of the policy and the completion of the term under the contract i.e., paying all your premiums. The maturity sum payable is usually the premiums paid till the date of the maturity and any additional benefits which the insurer chooses to pay to the policyholder.
What are the Advantages of Maturity Benefits?
A life insurance policy with maturity benefits offers policyholders with dual advantage. Firstly, the family of the policyholders gets death benefits in the event of untimely death or permanent disability. Secondly, the policyholders also get the maturity benefits in the event when the tenure of the policy ends. Several advantages of the maturity benefits in life insurance are as follows:
- Payback of Premiums: Life insurance with maturity benefits helps the policyholders to get their investments in the form of premiums back when the policy matures. This policy is unlike the term life insurance plan which only covers the death benefits and wherein premiums are not received back to the surviving policyholders post the maturity of the policy.
- Basic Benefits remain Intact: Life insurance with maturity benefits offers all the regular features and benefits related to basic life insurance. In addition to these basic benefits, these policies offer guaranteed additional returns on the maturity of the policy.
- Flexibility: Life insurance with maturity benefits can be subscribed by any one of the age 18 years or more. These policies are very flexible, and the policyholders can opt for the policy term, coverage, premium payment terms, etc. as per their needs and requirements.
- Safety of Family: Life insurance with maturity benefits offers the safety of the family of the policyholders in the event of their death and at the same time acts as a saving and investment mechanism for them to use the accumulated funds for future needs.
- Tax Benefits: Policyholders are eligible for tax benefits on life insurance with maturity benefits under Section 80C and Section 10D of the Income Tax Act, 1961. Section 80C allows deductions against the premiums paid while Section 10D allows the policyholder to receive the tax-free sum assured and bonus on maturity, subject to certain conditions. These conditions are mostly related to the percentage of the premium paid in actual sum assured and thus policyholders ought to be careful in order to avoid any tax liability during the policy term or later.
- Additional Cover: Life insurance with maturity benefits also offers additional rider benefits of accidental death or critical illness at the option of the policyholders. These additional rider benefits vary from insurer to insurer and depend on the policy chosen.
What are the different types of Maturity Insurance Policies?
There are various types of life insurance policies that come with maturity benefits. Some of them are discussed as under:
- Endowment Policy: This policy is the type of life insurance policy that is payable to the policyholder if they are still living on the policy’s maturity date, or to the beneficiary otherwise. Thus, these policies offer a dual combination of protection and savings to the policyholder. Under Endowment plans, generally, the returns are not very high as the funds are usually invested in debt funds.
- Money Back Policy: Under this policy, the policyholder receives money during the tenure of the policy. If the policyholders survive beyond the insurance term, they receive the balance portion of the corpus and the accrued bonus at the end of the policy term. In the event of the death of the insured, the beneficiaries are entitled to the entire sum assured. These policies are one of the most expensive insurance options as they offer returns even during the policy tenure.
- Unit-Linked Insurance Plans (ULIPs): This type of insurance policy offers the dual advantages of protection and flexibility of investment to the policyholders. Under ULIPs, the cash value of the policy varies in accordance with the current net value of the underlying investment assets. These plans also allow the option to partially withdraw the money which can be used to tackle financial needs by the policyholders.
- Term Life Insurance with Return of Premiums (TROP) plans: These plans are simply the term life insurance plans with the additional benefit of premiums being paid back to the policyholders at the end of the term if the policyholders survive the policy term.
- Savings & Investment Plans: These plans offer the policyholder assurance with the lump sum funds for future expenses. It provides an excellent savings tool for both short-term and long-term financial goals. This is a large categorization that covers all the traditional and unit-linked insurance plans.
Life insurance with maturity benefits offers additional advantages to the policyholders without any extra charges. These policies are an ideal choice for those people who want to protect their family members in their absence. Along with offering strong financial support to your family in your absence, these policies also allow you to reap the maturity benefits in your presence in order to meet your future financial needs. Therefore, life insurance policies are more than just a safety net for your family as they can also act as sound financial support to you and your family.