Why You Should Consider Purchasing A Term Insurance Plan With Maturity Benefits

You may already know about term insurance. It is a pure form of life coverage, where you pay premiums to financially cover your life for a certain duration. Upon your demise within the policy period, the sum assured is paid to your nominees or family members. If you outlive the policy tenure, then there are no benefits in the traditional version of the policy. However, there are term insurance tax benefits, i.e. deductions up to ₹ 1.5 lacs under Section 80C on your premium payments and exemptions on death benefits paid by the insurance company to your nominees under Section 10 (10D). 

The key question is, what if your term insurance policy came with maturity benefits? There are versions of the plan which come with this feature. Should you choose the same? Here is what you should know in this regard. 

Maturity Benefits and Term Insurance

First, let us understand maturity benefits. Any amount paid to the policyholder upon the maturity of insurance coverage is considered a maturity benefit. It has the sum assured, the terminal bonus (if applicable), and the accrued bonus in most cases. The benefit applies only when the policy is active throughout its designated tenure. Most life insurance policies with maturity benefits have tenures of 5, 10, 15, or even 20 years. These ensure coverage during emergencies and provide guaranteed returns and extra benefits in case the insured person outlives the policy tenure. 

Term Insurance with Return of Premium (TROP) may be identified as a plan offering maturity benefits. They have a structure that is not like conventional term insurance policies. These plans with maturity benefits ensure the return of premium and income replacement at maturity if the policyholder survives the whole policy duration. They are offered all the other benefits of conventional term insurance plans. Tax deductions are also applicable under Section 80C on premium payments for these plans. Similarly to their traditional counterparts, they also have the scope for adding riders like accidental death and critical illness (offers tax deductions on premiums paid under Section 80D) for boosting the family's overall financial security and coverage. 

Term insurance plans that offer a return of premium facility may be considered insurance products that can help people save some money and meet their future goals. Here's looking at some of the core features of these plans. 

Major Features of Term Insurance Plans with Maturity Benefits

Some of the top features of a term insurance plan with maturity benefits include the following: 

• Anybody between 18 and 65 years of age can buy these policies
• Single or regular premium payments may be made
• The maturity varies across policies, while the policy comes with both maturity and death benefits
• The minimum tenure is mostly five years, while the maximum duration can hover between 30-35 years
• Nominees can be selected for the death benefits
• The rate of the premium is based on the sum assured and age 

There is a free-look period of either 15 (those buying policies offline) or 30 (those buying policies online) days. You can scrutinize your policy during this period and return it if you are not happy with what it offers. 

Now we return to the main question- should you go for these plans? Read more on this below. 

Why choose term insurance plans with maturity benefits? 

Selecting term insurance plans with maturity benefits will give you the following advantages: 

• Unlike pure-term insurance plans, you get maturity benefits by refunding the premium (after the deduction of applicable charges) if you survive the policy tenure. Conventional term insurance policies only pay out death benefits upon the policyholder's demise in the policy period. There are no benefits in case the policyholder survives the tenure. 
• You also get similar death benefits with these policies, where the insurer pays the sum assured to the nominee upon your unfortunate demise within the policy tenure. This amount is paid with any accrued bonus if applicable. 
• You get similar tax benefits as regular term insurance plans, i.e. deductions up to ₹ 1.5 lacs under Section 80C of the Income Tax Act on premium payments
• You can also boost your plan with riders for added coverage and tax benefits

Hence, choosing a term insurance policy with maturity benefits can be a smart move since you do not lose out on any of the benefits of a regular term insurance plan. Instead, you can expect a lump sum payout as a maturity benefit if you survive the policy term. Moreover, if you have started young, you can use this amount in the later stages of life to meet diverse financial goals.