If you prefer the simplicity and cost-effectiveness of term life insurance plans, but expect a bit more from them, a term plan with maturity benefit may suit your needs. Also known as term insurance with return of premium, these plans give the premium back to the policyholder as a maturity benefit. Let’s dive into what is a term plan with maturity benefits and how it may suit your needs.
Term Plan with Maturity Benefit
A term insurance plan with maturity benefits is type of term policy offering a benefit when the life assured survives the duration of the policy. So, if you buy a term life insurance plan with maturity benefit and the person insured by the policy survives the duration of the plan, you may be able to claim the maturity benefit. In this case, the insurer returns the premium paid into the policy as a maturity benefit. The insurer may deduct any applicable charges.
This makes term insurance with maturity benefits suitable for anyone who not only expects maturity returns from their life insurance but also seeks a policy that is simple and relatively affordable.
Key Features of Term Plans with Maturity Benefits
Death Benefit: The insurer pays the sum assured to the beneficiaries if the life assured passes away during the term.
Maturity Benefit: The insurer returns all the premiums paid If the life assured survives the term.
Affordable Premiums: While slightly costlier than level term plans, these policies are still relatively affordable.
Flexible Terms: Policyholders can choose the policy term and sum assured based on their needs.
Why Choose a Term Plan with Maturity Benefit?
This plan suits people looking for a hassle-free plan with some amount of maturity benefit. For example, if you are looking for a policy to be in place for a limited duration to have a security net for your family while you deal with any financial obligations, a term plan with a maturity benefit could be the right fit for you.
Here are some reasons you may want to consider going for a term plan with maturity benefit.
Who Should Purchase a Term Plan with Maturity Benefits?
While term insurance with maturity benefits is an attractive option, it is particularly well-suited for specific financial profiles and goals. Understanding if you fall into these categories can help you make an informed decision.
Individuals who are disciplined savers but seek a forced savings product with a life cover.
If you tend to struggle with investing lump sums or consistent savings, the structure of this policy ensures you pay your premiums regularly. At the end of the term, you receive a substantial corpus back, which may not have been possible with a traditional, pure-risk term plan.
Young professionals and individuals with finite financial responsibilities
If you have specific liabilities, such as a home loan or other debts that will be cleared in 20-25 years, this policy can provide crucial coverage for that exact period. Once the liabilities are gone and the policy matures, the returned premiums can serve as a retirement nest egg or a fund for other goals.
Those who want more from their term plans
The comfort of knowing your premiums will be returned if you survive the policy term can make it appealing to many individuals. For this reason, a term insurance plan with maturity benefits is also called a ‘zero-cost’ plan, since your costs are ultimately returned to you.
How to Choose the Best Term Plan with Maturity
It is important to select the right term plan with a maturity benefit, for making the most of its offerings.
Step 1. Determine an Adequate Sum Assured
This is the most critical factor. Your life insurance coverage should be sufficient to secure your family's future in your absence. A good rule of thumb is to choose a sum assured that is at least 10-15 times your annual income. Factor in all future financial obligations, such as outstanding home/car loans, children's education, wedding costs, and daily living expenses. Use a term insurance calculator to check the cost for your planned sum assured.
Step 2. Select the Right Policy Term
The policy term should cover your entire income-generating years. Align the term life insurance with maturity benefits with your major financial liabilities. For instance, if you have a 25-year home loan, ensure your policy term is at least that long. A term of 20 to 30 years is generally advisable for most individuals, for ensuring continuous coverage until retirement and beyond key dependencies.
Step 3. Compare Premiums from Multiple Insurers
While these plans are relatively affordable, premiums can vary between companies. Get quotes from several reputable insurers and compare using a term insurance calculator. This will help ensure you are getting a competitive rate for the desired coverage and benefits.
Step 4. Check the Insurer's Claim Settlement Ratio (CSR)
The CSR is the percentage of claims the life insurance company has paid out in a year. This is a crucial indicator of its reliability. Always choose an insurer with a high and consistent CSR (ideally above 95%). This increases the likelihood that your family's claim will be honoured smoothly.
Step 5. Read the Policy Document
Before finalising the plan, read the sales brochure and policy wordings. Pay close attention to:
- The exact calculation of the maturity benefits of the term insurance plan (e.g., are all premiums returned, or are certain charges deducted?).
- The list of exclusions that could lead to a claim being rejected.
- The terms and conditions for policy revival if you miss a premium payment, and other similar aspects.
Term Plan with Maturity Benefit vs. Traditional Term Plan & Other Investments
If you are planning to add term life insurance with maturity benefits to your portfolio, it is important to understand how they stack up against other options:
Compared to Regular Term Plans
A traditional term plan is a pure risk cover. You pay a premium for a specific period, and the insurer pays the sum assured to your nominees only if an unfortunate event occurs during that term. If you survive, you do not get any money back. It is the most affordable form of life insurance. In contrast, a term plan with maturity benefit charges a higher premium but returns the total premiums paid (sometimes minus charges) if you outlive the policy term. This transforms the policy into a ‘zero-loss’ safety net.
Compared to a Traditional Term Plan + SIP
A common alternative is to buy a low-cost traditional term plan and systematically invest in a mutual fund SIP (Systematic Investment Plan). This has the potential to generate a higher maturity corpus due to market-linked returns. However, it carries market risk, with the final value not being guaranteed. A term plan with maturity benefit offers a guaranteed return of capital. This makes it suitable for highly risk-averse individuals who want to protect their capital over potentially higher, but uncertain, returns.
Compared to an Endowment or Money-Back Plan
While endowment plans also offer a maturity benefit, they are different. They combine insurance with savings and may not offer the same sum assured for the same premium amount. A term insurance plan with a maturity benefit will prioritise a high life cover first. The return of premium is often a secondary, guaranteed feature. Hence, a premium-return plan may be the best term insurance option for those whose primary need is solid life insurance coverage.
While level term plans are excellent for pure risk cover and other options are also worth considering, a term insurance with a maturity benefits can be more advantageous for those looking to ensure their investment doesn't go to waste if they outlive the policy term.
** Tax exemptions are as per applicable tax laws from time to time.
Disclaimers:
Disclaimers: IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North Tower, Building 4, Nesco IT Park, Nesco Centre, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 18002098700. Email id: customer.first@indiafirstlife.com, Website: www.indiafirstlife.com. Fax No.: +912268570600. IndiaFirst Life Insurance Company Limited is only the name of the Life Insurance Company and ________________ UIN ____________ is only the name of the Life Insurance Product and does not in any way indicate the quality of the contract, its future prospects, or returns. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd under License. Advt.
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