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What are maturity benefits?

dateKnowledge Centre Team dateDecember 31, 2020 views132 Views
What are maturity benefits?

When choosing a term life insurance, you should look at the maturity benefits it serves you. But, what are maturity benefits, and why are they important? What should be considered in a maturity benefit before applying for a term life insurance plan? This article discusses everything related to term insurance plans and the maturity benefits provided in term insurance.

What are the Maturity benefits of a Term Insurance Plan?

A term life insurance or term insurance plan is a policy plan designed to protect the insured person and her/his family financially during any unforeseen circumstances or death of the insured policyholder.

Maturity benefit is the policy’s holder or the nominee of the policy after the policy matures or terminates. In a term insurance policy, the maturity benefits may be as follows:

  • The sum assured by the insurer
  • Terminal bonuses
  • Accumulated bonuses (if guaranteed in the plan)

Generally, the maturity benefit is the accumulated sum of money deposited to the insurer during the continuation of the term life insurance given back to the policyholder promised by the insurer and bonuses when the policy matures. The maturity benefits are accumulated premiums deposited in terms of 5, 10, and 15 years.

Term Life Insurance vs. traditional Life Insurance Plans:

While both are insurance plans designed specially to cater to the uncertainties in our lives, term life insurance plans and traditional life insurance plans vary from each other. They vary based on death benefits, risks covered, savings, flexibility, and tax benefits.

Let us look at each one of them:

  • Death Benefits: The death benefit is considered one of the most significant differences between term life insurance and traditional life insurance policies. Term plans provide death benefits only in case of the insured person's death within the period. Traditional Life Insurance provides death benefit and maturity benefits to the policyholder.

    The death benefit amount provided to the insured or the nominee in a term life insurance is much higher than the traditional insurance policy.

  • Risks Covered: A term life insurance does not offer survival benefits as traditional life insurance does. If one can not afford to pay high premiums but want to avail of a death benefit, she/he should opt for term life insurance.

    Traditional Life Insurance is useful when one wishes to opt for an investment corpus along with a life cover. Term life insurance is pocket-friendly and provides high returns.

  • Flexibility: If the insured cannot pay premiums during the tenure, the policy lapses and the benefits are terminated in a Term life insurance plan. But, in a life insurance policy, the maturity amount is paid only if the policyholder completes the policy's tenure entirely. Also, most term life insurance plans are renewable and are convertible endowment plans with an increase in the premiums.
  • Tax Benefits: In a term life insurance plan, the premium paid is eligible for tax deductions under section 80C of the Income Tax Act. Moreover, it is less in amount compared to traditional life insurance. In traditional life insurance, the premium amount paid is more than in the term life insurance plan.

    Thus, if you want to save some money due to tax deductions, opt for the term life insurance plans and utilize the amount in other tax saving plans (Equity Linked Savings Scheme) ELSS and (Public Provident Fund) PPF.

  • Annual premium amount: Term life insurance plans provide higher coverage at minimal costs. For a higher coverage under the life insurance policy, policyholders need to pay a higher premium amount. Thus, many times, policyholders fail to pay premiums in time and halt their insurance policy. Thus, a term life insurance plan is an affordable and straightforward way to secure your family’s future if you do not have a stable income or have high expenditure with minimal savings in your family. Traditional life insurance policies offer low returns and are helpful to a family with a stable income.

Benefits of a Term Life Insurance Plan with maturity benefits:

As explained above, we can derive the benefits of term life insurance as follows:

  • Term life insurance provides premiums at affordable and feasibly minimal rates.
  • It is helpful for families with less income, unstable income, or both.
  • It provides benefits like tax deductions, reducing the annual premium amount to be paid.
  • It provides the chance to revoke the plan anytime if the policyholder is unable to pay.
  • It provides death benefits along with maturity benefits to the policyholder or the nominee.
  • It also provides riders for Critical Illness, Accidental deaths, and other aids.

Varieties of Maturity Benefit Plans:

Plans with maturity benefits come with various advantages. But, they differ in the types of premiums, investments, and benefits. Following are the three common types of maturity benefit plans:

1. Term Life with Return of Premium (TLRP Plans):

In Term Life with Return of Premium insurance plans, the additional benefit of premiums is returned to the policyholder after the insurance's termination, if the insured survives the policy term.

2. Endowment Plans:

Endowment plans are, generally, a combination of investment and insurance. Here, the assured sum is not very high. Funds are invested in debt funds, making the returns come to you at a lower risk and are therefore not high.

3. Unit Linked Insurance Plans:

Unit Linked Insurance Plans are plans linked to the share markets. They are vulnerable, and the risk is higher than traditional life insurance products. Besides, they have additional charges. Like endowment plans, a part of the premiums is invested in financial products that give the policyholder the advantages of insurance and investment. This plan also allows partial withdrawals of money and is beneficial during the time of a crisis.

Key points to remember in a Term Life Insurance with maturity benefits

The term life insurance with maturity benefits comes with many features that must be kept in mind before selecting the plan. We have listed below the features that must be noted while opting for the term life insurance plans:

  • Policy Term: The plan's minimum policy term is five years, and the maximum policy term may range between 30-35 years.
  • Entry Age: A person as young as 18 years of age can opt for the policy, and citizens of a maximum of 65 years of age can apply for a term life insurance plan.
  • Plan Types: Term life insurance plans provide flexibilities in choosing plan types as a single life basis or joint life basis.
  • Premium paying frequency: A policyholder can pay premiums monthly or yearly, as per the policyholder's convenience.
  • Policy Coverage: The areas covered by the term life insurance policy are as follows:
    • Death Benefits
    • Maturity Benefits
    • Tax Benefits
    • Other coverages like accidental coverage, critical illnesses, etc.
  • Nominations: The criteria for nominations are similar to traditional life insurances. Any person, related or unrelated by blood, can be a nominee. If under 18 years of age, an attendee will be nominated in place of the nominee. Check out our article to know more.
  • Age of maturity: Ages of maturity differ from policies to policies and insurers to insurers. Some are 25 years, 65 years, 75 years, and a lifetime.
  • Premium Amounts: Premium Amounts are based on assured sum and the policyholder's age at the time of initiation of the policy.
  • Paying terms of premium: The payment terms of the premium amount are:
    • Single Pay
    • Regular Pay
    • Limited Pay
  • Sum Assured: The sum assured varies from policies to policies and insurance providers to other providers.
  • Policy Revival: If there is an unpaid premium, a policy can be revived within two years from the date of the non-payment of the premium.
  • Free-look Period: In a term life insurance policy, the free-look period is 15 days for a policy purchased offline or manually and 30 days for a policy purchased online.
  • Grace Period: The grace period varies from 15 to 30 days in term life insurance. It is mostly 15 days of monthly mode policies and 30 days of grace period for other modes of policy.

How to choose the best term life insurance policy for yourself?

Term life insurance policies provide lots of advantages to the Indian demography. With little investment in premiums, you can avail a lot of benefits for yourself and your family. Following are some tips to consider while selecting a term life insurance plan:

  • Compare the plans provided by various insurance providing companies.
  • Select from the companies that are trustworthy and have a good customer base.
  • Understand your finances better before taking any crucial step.
  • Keep track of the share markets while investing or applying for insurance plans.

Features of Plan Options in iSelect+ Term Life Insurance Plan:

Canara HSBC Oriental Bank of Commerce provides an iSelect+ Term Life Insurance Plan that covers your family’s safety in case of any accidental damage or death of the person insured. A flexible plan that safeguards the family in emergencies by providing coverage, premiums, and benefits payouts.

Plan Option Life The Sum Assured on death is payable, in case of death or diagnosis of Terminal Illness of the insured person. After the payment of the benefit, the policy terminates.
Both the insured person and the spouse can be covered for the term. TnCs apply.
Plan Option Life with Return of Premium The sum assured on death is paid, in case of death or diagnosis of terminal illness of the insured person. After the payment of the benefit, the policy terminates.

If the insured person outlives the policy term, the Total Premium Paid will be paid to the insured at maturity and the policy terminates after the payment.
Plan Option Life Plus The sum assured on death is paid, in case of death or diagnosis of terminal illness of the insured person. After the payment of the benefit, the policy terminates.

If the insured person outlives the policy term, the Total Premium Paid will be paid to the insured at maturity and the policy continues after maturity till the insured person reaches 99 years of age. It is the Extended Cover Period.

On attaining age 99 years, the sum assured will be paid to the insurer and policy will terminate thereafter.

The maturity benefits provided in the iSelect Star Term Plan is very advantageous to Indian families with unstable incomes or low incomes. They help secure your family's finances after your death if you are the family's sole bread earner. Remember; an insurance plan's terms and conditions should be understood carefully before applying and investing in them.

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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