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Maturity Age of a Term Insurance Policy

TeamAckoSept 27, 2024

Term Insurance is the most fundamental and traditional form of life insurance that aims to provide financial protection to the nominees in the event of the untimely demise of the policyholder during the policy term. It is a foremost plan to take care of the needs of one’s dependents. This is especially recommended to the sole breadwinners of a family. You must be aware of certain concepts before purchasing this plan and maturity age (maturity date) is one such concept

Maturity

Contents

Benefits of Term Insurance
3 Types of Maturity Benefits of Life Insurance
Types of life insurance policies that offer maturity benefits
Features of Term Plan with maturity benefits
How to Choose the Best Term Plan?
- Explore ACKO Life Flexi Term Plan
Wrapping Up
Frequently Asked Questions

What is the maturity age of a term insurance policy?

The maturity age of a Term Insurance policy refers to the date when the financial obligation between the insurer and the policyholder is over.

It is crucial to understand that Term insurance typically doesn't offer maturity benefits because it lacks a savings component. Instead, it provides life coverage at a nominal premium rate. However, some plans like endowment or Term Insurance with a Return of Premium offer maturity benefits.

Let’s look at an example to better understand the maturity age in term insurance.

Rohan purchased a term plan for 15 years with a sum insured at Rs. 50 lakhs. He chooses his wife to be the nominee.

He pays a nominal premium of Rs. 700 per month. Fortunately, Rohan survives the next 15 years of his policy term. At the end of 15 years, the policy matures without any maturity benefits being paid to him or his wife as he had not opted for a Return of Premiums add-on at the time of the purchase of the policy. In the event of Rohan’s death during the policy tenure, the amount would have been paid to Rohan’s wife.

In the case of Term Insurance with a Return of Premium add-on, the maturity age of the insurance policy would call for maturity benefits consisting of the total amount of paid premium. Here, the premiums are usually higher as they cover unforeseen events and investment needs.

Benefits of Term Insurance

Here’s a list of benefits associated with TI and maturity benefits.

Maturity benefits: If the term plan is taken along with the Return of Premium add-on, then the policy has added maturity benefits. This takes place in case the insured outlives the policy term.

Death benefits: Term Insurance offers death benefits, the sum assured promised to provide to the beneficiary of the policyholder in the event of the policyholder's death during the term of the policy.

Add-ons and Riders: The best way to personalise a Term Plan is by adding life insurance riders. These help the policy fit one’s individual needs. These can also be beneficial in increasing the overall coverage, depending on the choice of the rider.

Tax benefits: Premiums paid towards term plans with maturity benefits are exempt from tax under Section 80C of the Income Tax Act (If the maturity benefits are available, they are also exempt from tax under Section 10 D) as per applicable terms and conditions.

Affordable: Term Insurance usually comes with a reasonable price for premiums. The best way to avoid financial pressure is to select a plan with a longer policy term. This is also helpful in covering financial needs in the future.

3 Types of Maturity Benefits of Life Insurance

Some common types of maturity benefits are as follows.

Accumulated bonuses: These bonuses accrue over the policy term and are paid out either at maturity or in the event of the policyholder's demise.

Terminal bonuses: These are additional bonuses declared by the insurer upon the maturity of the insurance plan, representing a residual bonus.

Sum assured: This is the guaranteed fixed amount that the insurer pays to the policyholder's beneficiaries at the time of the policyholder's death.

Types of life insurance policies that offer maturity benefits

Here are some maturity benefits that are offered to the policyholder in case he survives the term of the policy.

Unit-Linked Insurance Plans (ULIPs): Under Unit-linked Insurance Plans come with an investment component because they generate returns. The remaining part of the premium is utilised to provide life coverage. These might come with some associated charges and usually have a higher risk involved but the rate of return is also higher. Partial withdrawals of money are also allowed from ULIPs to meet any financial requirement.

Term Plan with Return of Premium: Under this category, premiums are returned to the policyholder at the maturity of the Term Plan. Apart from this, the death benefits are also included where the sum assured is paid to the nominee on account of the demise of the policyholder. Therefore, these offer dual benefits.

Endowment Plans: Endowment plans also offer the benefits of both investment and insurance. This differs from ULIPs as the investment is made in debt funds and the risk is lower. These offer maturity benefits with added bonuses to the policyholder if they survive the policy term. The sum assured is usually lower than Term Plans.

Features of Term Plan with maturity benefits

Some of the features of a Term Plan with maturity benefits are as follows. Note that these are generic and exact details depend upon the chosen plan.

Age limit	18 years to 65 years
Plan type	A spouse can be added to Term plan
Policy term	5 years to 35 years
Choice of premium payment	Monthly/yearly
Coverage	Maturity and/or death benefits
Free look period (time in which the policy can be cancelled by the policyholder)	30 days, depending upon the terms and conditions of the insurer.
Premium paying term	Single pay Limited pay Regular pay
Age at maturity	25 years/ 75 years or whole life

How to Choose the Best Term Plan?

Choosing the best Term Plan can be a crucial choice for the financial security of one’s family. There are many plans to choose from in the market, but understanding which can provide maximum security requires considering the following points before making the purchase.

Analyse your income: The premiums paid towards Term Insurance should not come at the cost of an overbearing financial burden. It is prudent to make investments according to one’s income. A clear idea of one’s income can help determine what portion can be paid towards an insurance plan in the long run.

Analyse existing liabilities: Any financial commitments that may be diverted to one’s dependents in the policyholder’s absence must be clearly examined. These include debts, mortgage payments, higher studies, or children's marriage. To protect the dependents from overburdening financial responsibilities, the Term Plan should be chosen wisely to meet all such requirements. This is crucial in determining the sum assured in the policy.

Addition of riders: Adding riders is the best method to boost a Term Plan coverage. These additional services come at a low cost but with high benefits. These can be purchased at the time of the purchase or renewal of the base policy. This helps the policyholder personalise the policy to cater to all his financial needs.

Claim settlement ratio: The choice of the insurance company should be selected based on the number of claims it settles in a year. This is where the claim settlement ratio comes into play. It signifies a ratio of claims paid to the total number of claims filed in a year. Therefore, a higher ratio means that it will be easier for the dependents to receive payouts in the event of the demise of the policyholder.

Analyse the life stage: Age is a significant factor in deciding a Term Plan. Young or middle ages come with more responsibility towards one’s dependents. Early investment in a Term Plan is a better choice as it provides more benefits and costs less.

Cost of premium: The cost of the premium should not overwhelm the policyholder.

Review Renewal Options: Understand the terms and implications of renewing coverage beyond the initial maturity age.

Explore ACKO Life Flexi Term Plan

The ACKO Life Flexi Term Plan stands out for its exceptional combination of flexibility, affordability, and user-friendliness. With this plan, you get comprehensive coverage and premiums that are pocket-friendly. What sets this plan apart is its adaptability, allowing you to adjust your coverage to suit your changing life stages and financial situations. You can also add useful riders, such as accidental death, accidental total permanent disabilities, and critical illness, to enhance your coverage.

Key features and benefits of the plan include:

Flexible Policy Tenure	Cost-Effective Premiums
Flexibility in Sum Assured	Will Creation Services
Important Riders	Adaptable Payout Options

Find the right plan-->

Wrapping Up

Selecting the right term insurance policy and maturity age involves evaluating your financial needs, goals, age, health, and budget. It's essential to weigh these factors carefully to ensure that your term plan adequately protects your family financially.

Frequently Asked Questions

Here’s a list of common questions and answers related to maturity age in Term Insurance.

What is a maturity date?

The maturity date in life insurance is when your policy ends. It's the date when your coverage period comes to a close. Policyholders eligible for maturity benefits will receive their payouts at this time.

Do all Term Plans have maturity benefits?

No, most Term Plans do not have maturity benefits. However, a Return of Premium rider can offer such benefits.

What If the policyholder passes away in the international territory?

The nominee of the policyholder is still eligible for a payout after completing the necessary documentation provided the applicable terms and conditions are met.

Is lifestyle an important factor for buying a Term Plan?

Yes, some habits like smoking and drinking are considered before the purchase of the Term Plan. This is because such habits make you more susceptible to developing illnesses in life.

What deaths are covered under a Term Plan?

All kinds of deaths are covered under a Term Plan unless specifically excluded in the policy document. Thus, go through the exclusions carefully.

What are add-ons?

Add-ons, also called riders, cover additional financial emergencies at a low cost. These can be opted for at the time of the purchase of the policy. The choice of riders available may depend on the insurance company.

Can I buy multiple Term Plans from different insurance companies?

Yes, one can purchase multiple Term Plans from different insurance companies.

Why should one buy a Term Insurance plan?

A Term Insurance plan is one of the best life insurance policies to buy early in life. It provides a financial cushion to the family of the policyholder upon policyholder’s death and the premiums paid towards it come at an affordable price. Also, the addition of riders can make a base plan way more robust by increasing the overall cover and financial security.

Should I purchase term insurance with a return of premium option?

The decision to purchase term insurance with a return of premium (ROP) option depends on your financial goals, risk tolerance, and overall insurance needs.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.