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Basic Guide to Understand Life Insurance Maturity Benefits

By PolicyBazaar

Buy a term plan and secure your family

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Published: 14 April 2020Last Updated On: 05 February 2021

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Buying life insurance is sort of a necessity when it comes to protecting your loved ones in case of unfortunate situations such as death, disabilities or accidents that may lead to a loss of income. Even though it is impossible to put a monetary value on one’s life, the amount given out as compensation is determined on the basis of the loss of income in the future. You must have come across the word ‘sum assured’ whenever we talk about insurance, this stands for the guaranteed payout that you or your family is ought to receive in case of the demise or any disability of the policyholder.

However, there are also fair chances that the policyholder may complete the entire tenure of the policy without anything unfortunate happening to him or her. Will the insurance provider compensate the policyholder against the premiums that have been paid by him or her over the years? And what about the financial goals that have been set such as a child’s education, their marriage, or a family trip abroad?

Under a typical term life insurance policy, there are no paybacks if the insured survives the tenure of the policy. But if you are seeking to opt for life insurance benefits on the insurance policy you hold, it is best to look out for plans that give out maturity benefits.

Types of Policies with Maturity Life Insurance Benefits

Most of the policies in the market that come with the maturity life insurance benefits are for tenures of 5, 10, 15 or 20 years. In such policies not only do the family members receive benefits in case of an unfortunate occurrence but if you (insured individual) survive through the entire term of the policy, there are benefits that can be availed. This is a win-win situation for both your loved ones and you.

As compared to the term life plans in the market, where you lose the advantage of the premiums that you have paid over the course of the policy, if you survive the term of the policy, the maturity benefit plans offered ensures that you will earn returns.

Types of Maturity Life Insurance Benefits Plans

The different types of maturity benefit plans available in the market are:

Term Life with Return Of Remium Plans

These are a type of term insurance plans with an additional benefit offered to the policyholder wherein the premiums are returned to him or her at the end of the term of the policy upon the insured individual surviving the term of the policy.

Endowment Plans

These types of plans combine the benefit of insurance and investment. The investment part of the funds is done by using debt funds as an investment tool, so the returns earned are not very high, but at the same time, the risk involved is also manageable. The sum assured i.e., the lump sum amount received by your beneficiaries as a payout after your demise is generally not that high.

United Linked Insurance Policies

Just as with the Endowment plans, ULIPs are financial tools that also give the individual the advantage of both insurance and investment. Since this product is a market-linked product, the potential risk involved is generally higher than that of general life insurance products, and there are some related charges.

However, these type of plans provides the holders of the policies with equity exposures that help in growing their funds at a rate of return that is higher. These plans generally also allow the holder to partially withdraw the money that can be used to handle any financial emergency that may arise at any time.

These maturity life insurance benefits help in getting the monetary advantage of guaranteed returns (in case of the term return on premium and endowment plans) since there is a refund of premiums at the time of maturity of the policy if the policyholder survives the term, and of course, if the policyholder faces an unfortunate scenario within the period, the death life insurance benefits are applicable.

Advantages of Policies with Life Insurance Benefits

The policyholder can claim the life insurance benefits once the policy matures, and the insurance providers give a fixed amount for the traditional products and a variable amount for market-linked plans such as ULIPs after the tenure of the plan is completed. However, this is only applicable as long as the policy is being conducted as per the contract terms decided among the insurer and insured. Usually, the maturity life insurance benefits include a sum of the paid premiums till a fixed date and any additional benefits that may be stated in the policy contract.

Initially, the benefits at maturity are limited to the total premium amount paid, but this amount gradually increases annually, which makes these plans both an investment avenue as well as an insurance policy. There is a constant increase in the corpus and at the end of the term the insurance provider pays out the entire amount to the policyholder.

Key Features of Maturity Benefits Plans

  • The entry age for these plans is generally 18 years.
  • There are paying terms for the premium payments that vary from limited pay (pre-decided number of years), single pay (upfront), and regular pay (throughout the term).
  • The maturity of the policy differs from one policy to another (could be 25 years, 65 years, or even whole life).
  • Premium payments can be made on a monthly or yearly basis, as decided.
  • The policy term varies from 5 years to about 30-35 years.
  • The coverage offers both maturity and death benefits.

Death Benefits: If the holder of the policy passes away within the term of the policy, the designated beneficiaries will get the death benefits.

Maturity Benefits: Unlike traditional life insurance policies, policies with life insurance benefits offer the refund of the premium payments made during the tenure along with any additional benefits, if the policy is held by the individual till the end of the term.

Additional Cover: Some of the policies in the market also offer additional rider benefits that can be added to the base policy to enhance the scope of coverage. Some of the riders available are - accidental death benefit, critical illness cover, waiver of premium cover, among others, but it varies from one insurance provider to another.

To Further Conclude

It is clear by now that life insurance does not just give you a peaceful mind for any unforeseen scenarios, but also helps you in achieving any life goals that you have set for the future via giving you the much needed financial support.