- Date : 09/01/2021
- Read: 5 mins
Is your life insurance due for maturity soon? Here are 8 things you must know.
A life insurance policy with maturity benefit is not only an insurance product, it also acts as a savings instrument. Not being able to claim the maturity benefits defeats the purpose of buying such a plan. You normally get back the insurance premium that you paid as maturity benefit. Additionally, you may also be eligible to receive a sum over and above the premiums in the form of maturity bonus.
Here’s a list of things you must keep in mind when your life insurance matures.
1. Understand the claim process
The maturity claim process normally does not include a lot of paperwork. The main document is the policy discharge form, which your insurer will usually send a month before the date of maturity. The form will outline the details and the documents required for the claim process. You can also download the form from the insurer’s website. Once you submit the form along with the supporting details, the insurer evaluates and verifies it. Upon successful verification, your claim will get processed. You will receive the maturity amount directly in your bank account, subject to the fulfilment of the terms and conditions.
Related: A simple guide to life insurance
2. Know the benefits you are entitled to
Endowment plans, money-back plans, and unit-linked insurance plans (ULIPs) offer maturity benefits. You typically get back the premium paid but the benefits could differ from policy to policy. Ideally, you must take a look at the benefits before buying the plan so that you know if it aligns with your financial goals. Some plans invest a part of the premium in debt, while some put it in equity. So, you can also expect to get some additional benefit depending on the type of plan.
3. Complete the documentation
Understand the documentation for enabling a smooth claim process. You must have a set of documents ready along with the policy discharge form. Please note that you will also require two witnesses to attest to the discharge form. You may have to submit these additional documents if asked:
- Policy document in original
- Copy of identity proof
- Copy of address proof
- Bank mandate and bank details
- A cancelled cheque leaf
4. Stick to the timeline
Adherence to the timeline is important for ensuring a seamless maturity claim settlement. Submit the duly filled form and the supporting documents to the insurer in time. It must typically reach your insurer five to seven days before the maturity of your life insurance policy. While you will still receive your settlement amount if you submit your documents later, submitting them on time will means that you will get the money on the day it matures.
5. Confirm the mode of receipt
The claim amount usually gets credited to your bank account. This is why you are asked to submit the bank details and a cancelled cheque along with the discharge form. Alternatively, you may ask for the issuance of a cheque and the insurer will send a post-dated cheque to your registered address. You can encash the cheque after the maturity of the policy.
6. Be aware of any tax exemptions
The amount received on maturity or bonus is fully exempted under Section 10 (10D) of the Income Tax Act of 1961. You can avail of the exemption in the following cases:
- The issuance of the policy is before 1 April 2012 and the premium paid does not exceed 20% of the sum assured.
- The issuance of the policy is after 1 April 2012 and the premium paid does not exceed 10% of the sum assured.
7. Use the maturity proceeds prudently
A life insurance policy is normally for a term of 5, 10, 15, or 20 years. You receive the benefits after it matures. Use the proceeds prudently as per your financial needs. The best thing to do would be to invest it in a long-term goal such as your children’s marriage or grandchildren’s education. You can also use this money to enhance your retirement corpus.
8. Get your life insured afresh
As soon as the policy matures, your life coverage ceases to exist. Understanding the prevailing uncertainties, it is vital to get yourself covered. If you wish to continue with the same insurer, make sure you inform them before the current plan expires so that you will be able to renew the same plan for extended coverage.
The settlement of a maturity claim is a simple process, provided you have all the documents in place. Once you receive your claim, it is important to use the maturity benefits wisely. Depending on your current situation or life stage, choose a suitable life insurance product so you and your family are protected against any unforeseen eventuality. Maturity benefits: what you need to know when buying insurance.