Term Insurance With Maturity Benefits

What Is Maturity Benefit In Term Insurance?

 

In India, a maturity benefit of term insurance plan means the amount that is paid to the policyholder in case the insurance policy completes the full term without any claims being made. It is different from other plans because it blends the benefits of savings and protection. In most term insurance plans, if the insured person survives the policy term, there is usually no maturity benefit, meaning the premiums paid are not returned. Such benefits serve as a savings component in addition to alife cover. This way, the policyholder can maintain their policy for a full term, providing a financial payoff alongside protection.

 

Do Term Insurance Plans Always Come with Maturity Benefits?

 

It is not mandatory that all term insurance plans come with maturity benefits. In general, term insurance is bought to get a complete life cover which means it offers financial protection to your family in a case where you pass away during the policy term. What happens in such regular plans is that there is no payout of the premiums, unlike plans that come with maturity benefits.

Such insurance plans offer maturity benefits via a feature known as “Return of Premium” or ROP. It refers to a plan where if you survive the entire policy term then the insured funds are all the premiums you have paid. This way you can easily get your money back.

For example, a person buying a term life insurance with maturity benefit not only secures their family’s financial future in case of untimely death but also gets their premiums refunded if they outlive the policy term. While these plans usually have higher premiums compared to pure term insurance, they offer added peace of mind by ensuring you don’t lose the money paid over the years.

 

What Are The Key Features Of Term Insurance With Maturity Benefit?

 

Term insurance plans with maturity benefits come with some special features that make them different from regular term plans. Here’s a simple explanation of the key features:

 

1. Return of premium term insurance plans offer higher value proposition

 

Even though pure term insurance provides one with the necessary coverage to keep their own as well as their family’s life goals on track, the return of premium plans go one step further and ensure that there are no sunk costs (or lost money) if they survive the policy period. By returning the premiums paid during the policy term, these plans help create a corpus for the life assured.

 

2. Return of premium term insurance plans incentivize healthy lifestyle

 

By offering the option to get one’s total premiums paid returned after the policy term on surviving the policy period, the return of premium plans tend to incentivize healthy living among life assured. To avail this feature, people will most often than not maintain a healthy and active lifestyle.

 

3. Return of premium plans carry tax benefits

 

Even though these plans work as a long-term investment tool for individuals who survive the policy term, the return of premium term insurance plans has the same Section 80C tax exemption under the Income Tax Act, 1961 as pure term insurance plans. This means that premiums paid, and the amount withdrawn is tax-free under Section 80C and 10(10D) of the Income Tax Act.

 

4. Assured returns of premium

 

Return of premium term insurance plans are considered better value proposition by individuals seeking the protection offered by term insurance, yet get back the premiums paid by them, if they outlive the policy tenure. This assures them that their money does not become a sunk cost.

 

What Are The Benefits Of Term Plan With Maturity Benefit?

 

Term plans with maturity benefits offer a mix of protection and financial advantages. Here are the main benefits explained simply:

• Financial Security for Your Family: If something happens to you during the policy term, your family receives a death benefit that helps cover their expenses and maintain their lifestyle.
• Return of Premium: If you survive the entire policy term, you get back all the premiums you paid. This means your money is not lost, unlike regular term plans.
• Tax Savings: Premiums paid towards these plans qualify for tax deductions under Section 80C of the Income Tax Act, in case of old tax regime. Plus, the maturity amount is generally tax-free under Section 10(10D), giving you more tax benefits, subject to certain conditions.
• Encourages Savings: Since you get your premiums back at maturity, it helps you save money systematically while staying protected.
• Peace of Mind: You get the dual advantage of life cover and the assurance of getting your money back if you outlive the policy term, making it a smart financial choice for long-term security.

 

Who should buy Term Plans with Maturity Benefits?

 

Term insurance with maturity benefits (TROP) is a good choice for individuals who want both life protection and a return on premiums. Here’s who can benefit most:

• Newlyweds: Starting a life together comes with new responsibilities. A TROP plan ensures financial protection while offering a lump sum at maturity, helping build future plans like buying a home.
• Young Parents: Raising children means planning for their education and future needs. The death benefit provides security, while the maturity amount adds to savings if nothing happens to the insured.
• Self-Employed Individuals: With irregular income, a TROP policy acts as a backup plan. The maturity payout can be used as a savings corpus, and the death benefit ensures the family isn’t left without support.
• Homemakers: Even without an income, homemakers can contribute to financial security. The affordable premiums, along with death and maturity benefits, can help secure their family’s future effectively.

 

Conclusion

 

For those seeking higher value for their money, the term plan with return of premium can prove to be a better choice as the premium paid is assuredly returned once the life assured survives the policy term. Additionally, the return of premium term insurance plans come with benefits such as tax exemption as well as incentive to healthy living which make them a more power-packed proposition than pure term insurance plans. This means that the return of the premium term insurance plans not only provide the protection of life insurance but also promises to keep the individual’s life goals on track by assuring them of a cash inflow at the end of the policy term, if they outlive the policy tenure.

 

FAQs

Is It Wise To Buy Term Insurance with Maturity Benefit?

 

Yes, it is surely a good idea to buy term insurance with maturity benefits because it offers both coverage and a return on your premiums. In this plan, you are sure to get all premiums that you have paid for in case you survive the policy term.

 

Do All Term Insurance Plans Have Maturity Benefits?

 

No, it is not compulsory that all insurance plans will have maturity benefits. If you want to apply for this type of plan, then you need a plan that comes with the Return of Premium (TROP) option rather than the traditional term insurance plans.

 

Should I Buy Term Insurance with a Return of Premium Option?

 

You should consider buying a term insurance plan with a return of premium if you want both protection and value for money. This option is especially useful if you prefer not to lose your premiums after the policy ends. Although the premiums may be slightly higher, you get financial security for your loved ones and your money back if no claim is made. It's ideal for long-term planners who want benefits both ways.

 

What is the Grace Period in a Term Plan with Return of Premium?

 

The grace period is the extra time given to you to pay your premium after the due date. For term plans with a return of premium, the grace period is usually 15 days for monthly payments and up to 30 days for quarterly, half-yearly, or yearly payments. If you pay within this period, your policy stays active. If you don’t, the policy may lapse, and you could lose the benefits, including the return of premiums.

 

What Are the Key Features of Term Insurance with Maturity Benefits?

 

The key features of a term insurance with maturity benefits are - you get life cover and refund when you have paid premiums if you survive the policy term, there is a return of total premiums (excluding taxes and charges). It also offers tax benefits under Section 80C and 10(10D) subject to certain conditions, and overall you are sure that your money is secure.