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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?

A term plan with maturity benefit is a type of life insurance that provides life cover and savings benefits. If the policyholder survives the term, the insurance company offers a lump-sum payment at the end of the policy term.

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

Let’s look at some of the most essential features and advantages 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?

Selecting the most suitable term insurance plan with maturity benefits requires thorough research. Consider your financial commitments and future requirements to ensure the plan meets your family’s needs. Here are some key aspects to evaluate:

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

Point of Difference	Pure Term Plan	Term Plan with Maturity Benefit
Insurance Claim Benefit	A pure term plan provides only death benefit.	Term plan with maturity benefit provides death cover in case of death during the term and in case of survival, it pays back all the premiums paid.
Premium	The premium of pure term plan is lowest in the industry as compared to any other type of insurance. Usually, 0.1% of the sum assured	The premium in this case is comparatively higher, usually 2-3 times more than that of pure term plans.
Investment Objective	Suited for investors whose primary aim is to provide a high financial security to their dependents with a high sum assured.	More suited for people who are looking to have an optimum balance between financial protection and savings.
Surrender Value	No surrender value as there is no savings component here.	Provides surrender benefit after a minimum period when the policy has attained a surrender value.

Why You Should Consider Buying Term Insurance Despite No Maturity Benefits?

There are several reasons why you should consider buying term insurance, even if it doesn't offer 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?

Usually, it doesn’t. But it can change if a lifestyle declaration changes, such as smoking or any addition of riders.

Is the death of a policyholder covered even if they die outside India?

Yes, most term insurance policies cover the death of a policyholder even if they die outside India. However, it’s essential to check your policy's specific terms and conditions, as some insurers may have exclusions or require additional documentation. Always review your policy details.

Are there any disadvantages of a term plan with maturity benefit?

Yes, term plans with maturity benefits often have higher premiums than pure term plans. Additionally, the maturity benefit might be lower than the total premiums paid, and the investment returns may be lower than other investment options. Besides, inflation diminishes the value of the maturity benefit over time. Always compare and consider your financial goals.

Can you get your money back from term insurance on maturity?

Yes, you can get your money back from certain term insurance plans on maturity. These are known as term insurance with return of premium (TROP). If you outlive the policy term, the insurer will pay back the total annualised premiums you paid, excluding taxes.

Is it advisable to purchase term insurance with a maturity benefit?

Purchasing term insurance with maturity benefits can be a good option for those prioritising protection and savings. These policies offer a death benefit to your loved ones in case of your untimely demise, as well as lump-sum payments upon policy maturity.

Do all term insurance plans include maturity benefits?

No, not all term insurance plans include maturity benefits. Only term plans with return of premium options offer maturity benefits.

What are the main features of term insurance with maturity benefits?

Term insurance with maturity benefits combines protection (death benefit) with savings. Premiums are higher, and investment options may vary. Consider your financial goals before choosing the policy.

Does a term insurance plan offer maturity benefits?

A pure term insurance plan typically does not offer maturity benefits. It provides coverage for a specified term, and no benefits are paid out if the policyholder survives the term. However, some term plans with return of premium (TROP) offer maturity benefits by returning the premiums paid if the policyholder outlives the term.

What happens when a term insurance policy matures?

When a pure term insurance policy matures, the coverage ends, and no benefits are paid if the policyholder is still alive. In the case of a term plan with a return of premium, the premiums paid during the policy term are returned to the policyholder upon maturity.

Is there a way to get money back in term insurance after maturity?

Yes, term plans with return of premium (TROP) offer a way to get money back after maturity. These plans return the premiums the policyholder pays if they survive the policy term, providing a form of maturity benefit.

What is the difference between a pure term insurance plan and a term plan with maturity benefits?

A pure term insurance plan offers only death benefits, providing financial protection to the policyholder’s beneficiaries if they pass away during the policy term. In contrast, a term plan with maturity benefits, such as TROP, returns the premiums paid if the policyholder survives the term, offering savings and life coverage.

Are the term insurance maturity benefits taxable?

The maturity benefits of term insurance with return of premium (TROP) are generally tax-free under Section 10(10D) of the Income Tax Act, provided the premium paid does not exceed 10% of the sum assured. However, tax laws are subject to change, so it’s advisable to consult a tax professional for the latest information.

What is the grace period in the term plan with a return of premium?

The grace period in a term plan with a return of premium is the additional time given to the policyholder to pay the premium after the due date without losing coverage. This period typically ranges from 15 to 30 days, depending on the insurer’s terms and conditions.

Can I add ridеrs to tеrm insurancе policy with maturity bеnеfits with add-ons?

Yes, you can usually add riders to a term insurance policy with maturity benefits. Common riders include critical illness, accidental death, and waiver of premium. These riders enhance the coverage by providing additional benefits for specific situations.

Can I claim thе maturity bеnеfits aftеr thе waiting pеriod?

Maturity benefits of term insurance with return of premium are payable at the end of the policy term, not after a waiting period. The waiting period generally applies to claims for specific riders or benefits, such as critical illness coverage, rather than the maturity benefits.

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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.