Life insurance is designed to offer financial protection to your family in your absence. But what happens to the policy if the policyholder survives the entire coverage term? This is where the concept of survival benefit comes into play. Some policies offer a survival benefit payout if the insured lives through the duration of the policy. So, what is the survival benefit in life insurance, and who may find it useful? Here’s an article to guide you in this regard.
What is Survival Benefit?
The death benefit is the standard benefit offered by all life insurance plans. But some policies also offer a survival benefit. As a policyholder, it is important for you to know what the survival benefit in insurance is. It is a payment (usually a lump sum) made by the insurer to the policyholder if they outlive the entire policy term.
It is not to be confused with a maturity benefit or periodic payouts. It is applicable only in life insurance plans where the insured is alive on the date the policy ends. It is commonly found in return-of-premium term plans.
For example, if you buy a life insurance policy for 20 years with a survival benefit clause and live through those 20 years, the insurance company will pay out the survival benefit to you.
Now that you know what the survival benefit is in life insurance, let’s see how and whom it benefits.
How and Whom Does Survival Benefit Help?
Survival benefit helps people who want financial returns at the end of the policy term, especially if no unfortunate event has occurred during the policy term. This benefit supports those who plan not just for the uncertainty of death, but also for future needs like retirement or education.
The following profiles may find survival benefit in insurance particularly helpful:
Individuals planning for retirement
If you are looking for a payout to support your post-retirement lifestyle, survival benefits can help supplement your income.
Parents saving for a child's education
Opting for survival benefits with your insurance plan can provide funds when your child reaches college-going age.
Long-term savers
Those who want a guaranteed lump sum at the end of a fixed period may find survival benefits attractive.
This kind of payout can be used to meet life goals, repay loans, or invest further. While not all life insurance policies offer survival benefits, they are an added advantage in specific policies aimed at savings and investment.
If you want to further enhance the value of the policy while ensuring that the survival benefit remains intact, you can consider adding a rider in life insurance, such as critical illness or accidental death riders. It can increase the overall protection afforded by the policy.
Difference Between Survival Benefit vs Maturity Benefits
If you compare life insurance vs term insurance, you will know that term plans are a type of life insurance. However, not all life insurance policies are term plans.
Similarly, while survival benefits can be considered a type of maturity benefit, not all maturity benefit payouts are survival benefits.
Here’s a table explaining the difference between both.
Feature
| Survival Benefit
| Maturity Benefit
|
Condition for Payment
| If the policyholder survives the policy term
| Upon successful completion of the policy term
|
Type of Policy
| Available with return of premium policies.
| Common in endowment plans and ULIPs.
|
Beneficiary
| Paid to the policyholder
| Paid to the policyholder or the nominee (in some plans)
|
Purpose
| Reward for outliving the policy term
| Return of investment + bonus (if applicable)#
|
In many cases, the terms are used interchangeably, especially when one is talking about the holistic benefits of life insurance. However, the key distinction between both lies in what benefit is offered, who gets it, and under what conditions.
Understanding what the survival benefit is can help you in choosing the right life insurance plan for your goals. If you are looking for coverage along with a guaranteed payout for outliving your policy term, then life insurance with survival benefits is worth considering. It combines protection and savings and offers a meaningful return for those who remain committed to their long-term life insurance journey.
# Bonus rate may vary from time to time based on Company’s Investment Performance.
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