Simplifying Life Insurance in India
Term Insurance Plan with Maturity Benefits in India
Term insurance is an excellent choice for ensuring your family’s financial security in an unforeseen circumstance.
While pure-term insurance plans do not offer survival or maturity benefits to the policyholder, many individuals look for additional advantages in their term plans. Therefore, term insurance with a return of premium, also known as term insurance with a maturity benefit, is a feasible option for those who desire the life cover benefits of a term plan, along with some returns at the end of the policy term.
What is a Term Insurance with Maturity Benefits?
A term insurance with maturity benefits is essentially a term insurance that goes beyond the traditional feature of just death cover.
This policy provides coverage in the event of death and includes a savings component for those who outlive the policy term. When the policy matures, the policyholder receives a lump-sum refund of the premium paid, which is a valuable financial asset.
This innovative approach to traditional term insurance combines the security of insurance with the advantage of savings, thus adding an extra layer of financial planning and security.
How Does Term Plan with Maturity Benefits Work?
Illustration
Here's an example to illustrate how it works:
Raman is a 30-year-old software engineer earning ₹10 lakhs per annum. He wants to secure his family's financial future and buys a term plan with maturity benefits for a sum assured of ₹1 crore and a policy term of 30 years.
Raman pays an annual premium of ₹30,000 for 30 years. If he dies during the policy term, his family will receive a lump-sum amount of ₹1 crore as the death benefit. However, if Raman survives the policy term, he will receive the maturity benefit of ₹30 lakhs (the total premiums paid over 30 years plus a guaranteed interest rate) at the end of the policy term.
This type of policy helps to protect Raman's family financially in case of his untimely death and also serves as a long-term savings plan.
It also ensures that Raman receives a lump-sum amount at the end of the policy term if he survives, which he can use to accomplish his future financial goals.
Overall, term life insurance with maturity benefits helps you secure your family's financial future while also providing a savings component to help you achieve your long-term financial goals.
Do All Term Insurance Plans Have Maturity Benefits?
No, not all term insurance plans come with maturity benefits. Typically, pure term insurance plans offer pure protection. This means that the policyholder pays regular premiums to keep the plan active, and in the unfortunate event of their death, the assigned nominees receive a death benefit.
However, pure term plans do not provide any additional benefits. If a policyholder wants to receive a maturity or survival benefit, they must opt for term plans that include a return of premium benefit. This feature ensures that the premiums paid are returned to the policyholder if they survive the policy term.
Features and Benefits of Term Insurance with Maturity Benefits
1. Financial Security
The most important feature of a term plan is its financial coverage. Thus, in case of the policyholder's unfortunate demise, the dependent family receives the death benefit that ensures the family’s financial stability.2. Maturity Benefits
Unlike the traditional term policies, these policies provide a maturity benefit. This maturity benefit is the total of all premiums paid throughout the policy term.
Thus, if a policyholder survives the policy term, they receive back their investment, thus making this kind of plan a popular investment choice among people looking for financial coverage and potential savings.
3. Paid Up Option
Most of these policies offer a paid-up option. If the policyholder cannot continue paying premiums and has attained a paid-up status, the policy continues with reduced benefits.
This is a very useful feature for cases where adverse financial circumstances exist and the policyholder still wants to maintain some coverage but can no longer afford the premiums.
4. Flexible Payout Options
Only some people can manage a lumpsum payout. Suppose a policyholder feels that their dependents wouldn’t be able to manage the lump sum payout judiciously. In that case, they can opt for periodic payment of the maturity benefits, an income replacement.5. Surrender Value
As with all other insurance plans with a savings component, these term plans with maturity benefits also provide a surrender benefit.
If the policyholder needs to discontinue their policy before its maturity for any reason, they can surrender it and receive a specific surrender value.
This value depends on the number of premiums paid and the policy duration.
6. Riders
Riders can be attached to the base policy for enhanced and customised coverage, addressing specific needs like critical illness or disability.7. Tax Benefit
The premium paid towards term plans with maturity benefits is tax-free under Section 80C, and the benefits received are tax-free under Section 10(10D), thus ensuring that the dependents receive complete policy benefits without any tax liability.
However, the tax benefits depend on the prevailing tax norms.
How to Choose the Right Term Plan with Maturity Benefits?
Your Family’s Life Stage Requirements
A term plan with maturity benefits can provide comprehensive coverage throughout the policy period. Assess your family’s needs at each life stage, including education, medical emergencies, and daily expenses. Choose a term policy that offers adequate coverage for these needs.Loans and Liabilities
Ensure your term insurance plan can cover any unpaid loans and debts so your family isn’t burdened financially in your absence. Opt for a high-coverage policy that can address these financial emergencies and ensure a sufficient sum.Calculate the Premiums
While term plan premiums are generally affordable, those with maturity benefits may have slightly higher premiums due to the added maturity amount. Calculate how much premium you can afford based on your financial capacity and select a term plan accordingly.Premium Payment Options
Choose a plan that offers flexible premium payment options to maintain affordable premiums and keep your policy active. You can opt for single, regular, or limited pay and pay premiums monthly, quarterly, half-yearly, or annually.Compare Different Term Plans with Maturity Benefits
Term plans with maturity benefits are highly flexible, so compare different policies to find the best fit for your family’s needs. Look for additional benefits or riders, such as critical illness coverage, accidental death benefits, or disability coverage, providing a broader safety net for the policyholder and their family.
It combines the benefits of a term plan with the lifelong security of a whole-life policy. As long as the premiums are paid, the policy remains active, and the beneficiaries will receive a payout upon the insured’s death, regardless of when it occurs.
Who Should Buy a Term Insurance with Maturity Benefits?
We have different priorities regarding investment decisions based on our life goals and financial situations. Our health, age, lifestyle, source of income, liabilities, and dependents affect these decisions.
Hence, we might have different reasons for buying insurance coverage. Some of the most common groups of people who can buy term insurance with maturity benefits are:
1. Unmarried
As an unmarried person, you might still have your parents dependent on you, especially if they are retired or nearing retirement.
A term plan provides a financial cushion for them in case of your unfortunate death. If you survive the policy term, you have accumulated a corpus for yourself at a comparatively young age.
2. Married with Children
Parents carry an enormous financial responsibility for their children’s present and future. Apart from the current lifestyle, they also need to build savings for their future, viz., higher education, wedding, and other financial goals.
Even if your spouse earns, you must secure your share of finances with a term policy.
Term insurance with maturity benefits can help you achieve your primary life goals and your children. If you survive the term, you also get the maturity benefit that you can use for your retirement years.
3. Married without Children
Even if there is no responsibility for children yet, you still carry a responsibility towards your spouse, whether earning or not, not to mention your parents.
A term plan at any stage of life builds up a monetary backup for your dependents. The maturity benefits at the end of the policy term add up to your future savings.
4. For the Self-Employed
With regular income's unpredictability, a TROP policy's lump sum payout at maturity can be a substantial savings fund. Additionally, the death benefit ensures that the family's financial needs are met during the insured's demise.5. For Homemakers
A TROP policy's death and maturity benefits can provide financial security for the family while maintaining affordable premium payments.Difference Between Term Plan with Maturity Benefits and Pure Term Plan
Why You Should Consider Buying Term Insurance Despite No Maturity Benefits?
Financial Protection
Term insurance provides financial protection to your loved ones in case of your untimely demise. It ensures that your family is not burdened with financial obligations and can maintain their standard of living in your absence.Affordability Premiums
Term insurance is generally more affordable than other types of life insurance policies.Flexibility
Term insurance offers flexibility in terms of policy duration. You can choose a policy term that aligns with your specific needs, such as until your children become financially independent or until you pay off your mortgage.Peace of Mind
Knowing that your loved ones will be financially protected even if something happens to you can give you peace of mind. This can be especially important if your dependents rely on your income.Riders and Add-Ons
Customise your policy with riders, including accidental death benefits, critical illness, or disability coverage. This assists in covering the expenses for long-term treatment, thus guaranteeing the security of your savings. Furthermore, if the policyholder experiences an accident, an additional sum is paid on top of the life cover.Income Replacement
Helps replace your income if you are no longer around to support your family.
Although term insurance policies do not offer maturity benefits, they are highly valuable because they provide a substantial death benefit at a low premium cost. Unlike pure term insurance, term insurance with maturity benefits offers both death and survival benefits.
This can be a significant advantage when choosing a policy. This affordable investment ensures solid financial support for your family in your absence. Therefore, purchasing a term insurance plan with a return of premium is always wise and profitable. It’s essential to thoroughly research before selecting a policy.
FAQs about Term Plan with Maturity Benefits
Can a term plan premium change during the tenure of the policy?
Is the death of a policyholder covered even if they die outside India?
Are there any disadvantages of a term plan with maturity benefit?
Can you get your money back from term insurance on maturity?
Is it advisable to purchase term insurance with a maturity benefit?
Do all term insurance plans include maturity benefits?
What are the main features of term insurance with maturity benefits?
Does a term insurance plan offer maturity benefits?
What happens when a term insurance policy matures?
Is there a way to get money back in term insurance after maturity?
What is the difference between a pure term insurance plan and a term plan with maturity benefits?
Are the term insurance maturity benefits taxable?
What is the grace period in the term plan with a return of premium?
Can I add ridеrs to tеrm insurancе policy with maturity bеnеfits with add-ons?
Can I claim thе maturity bеnеfits aftеr thе waiting pеriod?
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Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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