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Deciphering Maturity Benefits for Term Life Insurance Plans

By Kapil Dwivedi
  | Published: 22 February 2021
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Term life insurance plan is an absolute must when it comes to safeguarding and protecting your loved ones against unforeseen events. Most of us spend a major portion of our time earning in order to protect the future of our loved ones without even realizing the fragility of human life. 

None of us are aware of what the future holds for us, therefore, it becomes vital to invest a small portion of your earning in a tool that provides financial support to your loved even in your absence. This is where term life insurance plans come into the picture. Although, there is nothing comparable to human life with the right term life insurance you can ensure that your loved ones do not have to struggle for mere necessities.

In most cases, people opting for term life insurance have a common question i.e., what if I complete the tenor of the policy without any unfortunate event, will I get any returns on the premium paid? Will my premium be wasted? Technically, term life insurance plans are designed and developed as risk mitigation tools and have no maturity benefit associated with them. 

However, after assessment of customer’s needs, different insurances have started coming with term life insurance policies with maturity benefit to make sure that your invested money does not go in vain. In this thread, we are going to dive deeper into the nuances of maturity benefits associated with term life insurance plans

Term Life Plans with Maturity Benefits 

Term life insurance plans that come with maturity benefits are new to the market and tend to vary from provider to provider in terms of features and benefits. The majority of policies that come with maturity benefits have a term in the range of five to twenty years. In case, the policyholder passes away within the policy period the nominee of the plan will get the sum assured. Contrary to this, if the policyholder surpasses the policy period then maturity benefits can be claimed based on the plan and provider. 

The payable premium of term life plans with maturity benefits is a bit higher in comparison to conventional health insurance plans as these plans are not just risk mitigation tools instead, a guaranteed pay-out.

Benefits of Term Life Insurance with Maturity Benefits

Here’s a rundown on the major advantages and benefits of term life insurance with maturity benefits- 

  • Guaranteed Return on Investment: The first and foremost benefit of term life insurance with benefits is that these plans come with a guarantee of return on investment. Unlike, the conventional plans where there is no scope of return if the policyholder surpasses the policy period these plans provide guaranteed returns which makes them way too better than regular plans. 
  • Sum of Paid Premiums as Return: Typically, insurance providers offer returns in the form of the sum of paid premiums. However, if the policyholder has opted for different instruments such as ULIP or endowment plan then the return is variable. 
  • Investment plus Insurance: Conventional term life insurance plans serve the purpose of risk mitigation, but these plans with maturity benefit serve a dual purpose i.e., providing insurance and investment. The paid premium for the plans gradually increases overtime serving as an investment instrument.

Classification of Term Life Insurance Plans with Maturity Benefits

Term Life insurance plans with maturity benefits are classified on the basis of the services and returns they offer. In this section, we will take a closer look at types of term life insurance plans with maturity benefits along with their purpose and benefits:

  • Endowment Plans: Endowment plans serve the dual purpose of providing insurance along with investment. The paid premium is divided into two parts, one is paid towards the insurance component and the second one is allocated towards a debt fund which provides returns later. The best part about endowment plans is that they yield moderate returns and have a low risk-profile making them suitable for people with a low appetite for risk. 
  • ULIPs (Unit Linked Investment Plans): Similar to endowment plans ULIPs offer the feature of both insurance and investment to the policyholder. A major difference in ULIPs and endowment plans is that these plans allocate the investment portion of the premium in a market instrument. Therefore, the degree of risk associated with ULIPs is higher in comparison to endowment plans. 
  • Term Insurance with Return of Paid Premiums: Term Insurance plans are considered to be pure risk mitigation plans that are easily available and affordable. Policyholders looking for seeking returns on term plans can opt for the ones that come with the feature of return of paid premium. In this way, they can not only mitigate the degree of risk associated but also ensure that their hard-earned savings do not go in vain. 

Features and Characteristics of Term Life Plans with Maturity Benefits

The features of term life plans with maturity benefits are as follows- 

  • The minimum and maximum age for these plans are 18 and 65 years respectively. The age might vary from provider to provider.
  • Multiple modes of making payment
  • Flexible tenor 
  • The policy period varies typically varies from 5-35 years. 
  • The cover is provided in the form of a lump sum if the claim is made. 

In a Nutshell

The insurance market in the UAE is diverse and tends to change with the needs of customers. If you want an insurance plan that provides a guarantee of return you can opt for term life insurance with maturity benefit. This way you can not only manage to safeguard the financial future of your loved ones but also protect your paid premiums.