The power of life insurance with maturity benefits

Date : 15/08/2023
Read: 6 mins

Did you think life insurance only provides financial support in case of an unfortunate event? Think again! Maturity benefits can save and grow your money too. Here’s how…

Maturity benefits: what you need to know when buying insurance

From a mere 35.21 years in 1950 to a promising 81.96 years by 2100, the life expectancy rates in India are on the rise. This positive shift in life expectancy not only signifies longer, healthier lives but also underlines a critical aspect - the probability of witnessing the maturity of your life insurance policy.

Regular life insurance plans usually do not give money back for the premiums you have paid. They only provide you with a death benefit in the unfortunate event of your demise. But there is another kind of insurance that can do more. This is called a life insurance policy with maturity benefits. These policies can help you achieve big goals in life, like paying for your kid's education, their wedding, going on a family vacation, or the things you have always wanted to do.

Life insurance is not merely for safeguarding your loved ones against the uncertainties of life. It also empowers you to turn your dreams into reality. Find out more about life insurance with a maturity benefit and how it can help you.

Key highlights

Unlike regular life insurance, policies with maturity benefits offer more than just death coverage
A life insurance policy with maturity benefits can help you achieve life goals like a child’s education and wedding, travel, and more, making them a versatile financial tool
These policies offer flexibility in terms, payment, and choices, with potential tax benefits under sections 80C and 10D of the Indian Income Tax Act, 1961

What is a maturity benefit?

A maturity benefit is one of the many benefits of life insurance. It is a lump-sum amount the insurance company pays you after the policy maturity. This essentially means that if your insurance policy is for a term of 15 years, you, the insured, will get a pay-out after these 15 years. This amount includes the premiums you made through the years as well as a bonus. However, you only get this life insurance benefit if you have paid all your premiums and completed the term.

In addition, a maturity benefit policy also provides death risk cover. Hence, in the event of death during the policy term, your family will get the pay-out. This secures your family’s future in the aftermath of an unfortunate event.

Types of maturity insurance policies

Term Life with Return of Premium or TROP plans – Term insurance with maturity benefit offers an additional benefit of premiums being returned to the policyholder at the end of the term if the insured individual survives the policy term.
Endowment plans – These plans combine the benefit of investment and insurance. Funds are usually invested in debt funds so returns are not too high but come at a lower risk. The sum assured (i.e. the sum your family receives in case something happens to you) is usually not very high.
Unit Linked Insurance Plans – Like endowment plans, a part of the premium is invested in financial products that give the investor the benefit of both investment and insurance. Since it is a market-linked product, the potential for risk is higher than traditional life insurance products, and there are also some associated charges. However, these plans give policyholders equity exposure that grows their wealth at a much higher rate of return. These plans also allow partial withdrawals of money, which can be used to tackle financial needs as and when they arise.

Advantages of a maturity benefit life insurance

The above-mentioned types of life insurance products help you get your investment or premiums back once the policy matures. It is unlike a term plan that only offers death risk cover, wherein the premiums paid to an insurance company do not come back to you on surviving the term.

In such policies, all the regular features of life insurance remain the same. In addition, on insurance policy maturity, you get guaranteed returns plus bonuses earned from fund investments in case of endowment policies and ULIPs.

Such policies provide a safety net for your family in case of death, as well as work as a saving or investment tool for you to use the accumulated funds you get on maturity on education, travel, child’s marriage, etc.

Anyone over the age of 18 can buy a maturity benefit policy. These policies are flexible in nature, which means you can choose the policy term, value, payment terms, etc. to suit your comfort and convenience.

Flexible choices for buyers

A life insurance with maturity benefits is popular among buyers for the array of choices it has to offer, which may not be present everywhere else. They provide affordable plans for investment, which cater to a large target audience. They also come with advantages of life insurance like guaranteed increased returns no matter your policy term. This comes in handy for the generation of a substantial corpus that can be made use of in any situation. The premium amounts are low and do not burden your finances further. You can also choose to surrender your policy after definite periods or make a partial withdrawal accordingly.

Tax benefits

As per the Indian Income Tax Act, the policyholder is eligible to get tax benefits on the premiums paid for maturity benefits-related life insurance plans. These deductions are offered under Section 80C and Section 10D of the Act.

While Section 80C offers deductions against premium paid, Section 10D allows the recipient to receive a tax-free sum assured and bonus in case of maturity, surrender of policy or death, subject to some conditions. Most of these conditions are related to the percentage of premium paid in the context of the actual sum assured and must be studied carefully while buying insurance to avoid attracting tax during the policy term or later.

Additional cover

One can also buy additional riders of Accidental Death or Critical Illness along with a life insurance policy with a maturity benefit. This varies depending on the insurance company and the policy chosen. Read up on these before you make your decision.

Closing thoughts

Advantages of life insurance go beyond than being just a safety net for your family. Maturity benefits can help provide sound financial support and come handy when you wish to fulfil your dreams in your lifetime.