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What Happens When An Endowment Policy Matures?

If you’re looking for a plan that combines the benefits of an insurance cover with a savings component, then you should definitely look into endowment policies. While the lump sum payment from such plans helps secure your financial future, the life cover aspect helps create a protective bubble for your loved ones.

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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You can use the maturity benefit from such plans to fund your child’s educational aspirations or enjoy a comfortable retirement, among others. But before you decide what to do with your endowment maturity benefit, here’s a look at what it entails and some of the other benefits you stand to derive from such plans:

 

What is Endowment Plan Maturity?

 

Like all life insurance plans, endowment plans also come with a pre-determined tenure. When this tenure expires, your endowment policy is said to have matured. For instance, if you opt for an endowment plan with a 15-year tenure, you will receive the maturity benefits from the plan when this tenure ends. In other words, you stand to receive the return amount from such policies. If you are alive when the policy matures, the maturity benefits listed under the plan will directly accrue to you. However, if something untoward happens to you during the policy tenure, the death benefit of the plan will be given to the nominees named in your policy document.

 

Understanding Endowment Maturity Benefits

 

Your participating endowment maturity benefits will include the sum assured as well as the bonuses (if any) your funds have earned during the policy term. It is important to note that this maturity benefit includes the sum assured as well as the revisionary bonuses and any final bonuses that may have accrued to your policy. This total endowment maturity benefit will be paid to you as a lump sum amount or periodic income depending on the policy terms and conditions, For instance, if you have an endowment policy with a sum assured of 1,00,000, upon maturity, you will be entitled to this 1,00,000 as well as other cumulative bonuses (if any) your plan has earned over the years. Some plans offer you around 115% of the sum assured when the policy matures, provided that all your premium dues have been cleared.

The maturity benefit you derive from an endowment plan will depend on a host of factors like the kind of plan you pick and the length of the policy tenure. For instance, if you pick a non-profit endowment plan, you won’t qualify for any additional bonuses over and above the predetermined benefit amount for your policy. Unit-linked endowment plans are investments in which the premium is invested in unitised insurance fund units. Units are cashed in order to cover the cost of life insurance. Policyholders can frequently choose which funds and in what proportion their premiums are invested.

 

Other Benefits of Endowment Plans

 

While people tend to think of maturity benefits as the sole end goal of an endowment plan, the truth could not be more different. Apart from the sizable endowment maturity benefits, you also stand to derive a set of other benefits from such plans. Let’s have a look at these additional benefits:

Death Benefit-

Since endowment policies are insurance-cum-investment products, you are entitled to a life cover under such plans. This implies that your loved ones will receive a guaranteed payout if you happen to pass away before the end of the policy term, provided all due premiums are paid .This lump sum payment can be used by your dependents to meet necessary expenses and maintain their financial stability even in your absence.

Add-on Rider Benefits-

Endowment benefits can be further enhanced with effective add-on riders on payment of nominal extra premium. Each of these riders offers a payout when the contingency linked to them occurs. For instance, if you opt for a critical illness rider and are subsequently diagnosed with a critical illness during the policy term, you will stand to derive the payout benefits listed under this rider as per rider conditions. This payout can be used to ensure that your treatment costs are covered or to act as a supplementary source of income if the ailment impairs your ability to earn a living. Similarly, accidental death, complete or partial disability, waiver of premium and family income benefit riders are some of the most common add-ons you can opt for. However, it is important to note that every add-on rider comes against a nominal cost addition to your base premium amount.

Tax Benefits-

Under Section 80(C) of the Income Tax Act of 1961, you will be entitled to deduction of the premiums you pay for the endowment plan subject to the provisions stated in the said Act. Maturity or death benefit received under endowment policy is exempt, subject to satisfaction of conditions mentioned under Section 10(10D) of Income Tax Act.

 

Wrapping It Up

 

In some cases, you may have to surrender your endowment plan before it matures to meet a financial emergency. While you will be entitled to the surrender value of the plan (if the premiums for a certain number of years have been paid), this payout will be considerably less than the amount you stand to receive when the plan matures.

Thus, it is always preferred to refrain from surrendering your endowment plan before its maturity date as doing so eliminates your claim on the endowment maturity benefits under the plan and may hamper the safety net you were trying to guarantee for your family.

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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

**Past performance is not indicative of future performance.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.

The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

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*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

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