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Maturity Age of a Term Insurance Policy

TeamAckoDec 20, 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 policyholder's untimely demise 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.

In this article, you’ll explore key concepts such as maturity age, policy maturity, and maturity benefit. Understanding terms like date of maturity, maturity period, and maturity sum assured will help you make informed decisions about family security.

Maturity

Contents

What is Term Insurance?
What is the Maturity Age of a Term Insurance Policy?
3 Types of Maturity Benefits of Life Insurance
Benefits of Term Insurance
Types of Life Insurance Policies that Offer Maturity Benefits
How to Choose the Best Term Plan?
- Explore ACKO Life Flexi Term Plan
Conclusion
Frequently Asked Questions

What is Term Insurance?

Term insurance is a fundamental life insurance policy providing financial protection to the insured’s beneficiaries in case of the policyholder's death within the policy term. Generally, term insurance doesn’t offer a maturity benefit, as it lacks a savings component.

However, some options, like Term Insurance with Return of Premium, allow a payout upon maturity. In such cases, a policy is said to have matured when the policy term ends, meaning the insured may receive the premiums back. Understanding the concept of policy maturity, the date of maturity meaning, and maturity claim meaning helps in selecting suitable coverage aligned with financial goals.

What is the Maturity Age of a Term Insurance Policy?

The Maturity Age of a term insurance policy refers to the age at which the policyholder reaches the end of the policy's term, and the coverage expires. It marks the point when the policy term concludes, and the insurer’s financial obligation to the policyholder ends.

Here's an example to better understand what the maturity age of a term plan means:

Rohan buys a 15-year term plan with a sum assured of ₹50 lakhs at age 30, and names his wife as the nominee. He pays a premium of ₹700 per month. If Rohan survives the policy term, the policy will mature without any maturity benefit. However, had he chosen a term plan with maturity benefit (like Return of Premium), he would receive the total premiums paid upon reaching the maturity age. This option usually comes at a higher premium, balancing both life coverage and investment aspects.

In essence, date of maturity in term insurance signals the end of life coverage without additional benefits unless specified, like in term insurance with a maturity benefit or endowment plans. Understanding what is maturity in life insurance can help policyholders select coverage that aligns with both protection and financial goals.

Note: The maturity age in this case is 45. This is the age Rohan will reach when the policy matures, which is 15 years after he buys the policy at age 30). .

3 Types of Maturity Benefits of Life Insurance

Some common types of maturity benefits in insurance include:

1. Accumulated Bonuses
These bonuses accrue over the policy term and are either paid out at policy maturity or provided to beneficiaries if the policyholder passes away.

2. Terminal Bonuses
These are additional bonuses declared by the insurer upon the date of maturity of the insurance plan, acting as a residual bonus. In this context, the "date of maturity" refers to the end of the policy's term, when the benefits are paid out. Terminal bonuses may apply to certain types of endowment or whole life plans, though they are not common in standard term policies.

3. Sum Assured
The maturity sum assured meaning, the guaranteed amount that the insurer pays to the policyholder’s beneficiaries in the event of the policyholder's death.

Benefits of Term Insurance

Here’s a list of key benefits associated with term insurance (TI) and specific maturity benefits:

1. Maturity Benefits
If term insurance with maturity benefit is chosen, such as a term plan with Return of Premium add-on, the policyholder receives maturity benefits upon outliving the policy term. In such cases, a policy is referred to have matured when policy term ends and the insured receives the total premium paid back.

2. Death Benefits
The primary purpose of term insurance is to provide death benefits to the beneficiaries. This provides crucial financial support to the family during difficult times.

3. Add-ons and Riders
Term plans offer a variety of add-ons, including critical illness, accidental death, and disability riders, which enhance coverage and personalise the policy. By choosing these life insurance riders, policyholders can increase protection beyond the base policy.

4. Tax Benefits
Premiums paid toward term insurance with maturity benefits are tax-exempt under Section 80C of the Income Tax Act. If the policy offers maturity benefits, it is exempted from tax under Section 10D, subject to terms and conditions. This can offer additional financial savings over time.

5. Affordability
One of the standout features of term insurance is its affordability. Term plans generally offer substantial coverage for nominal premiums, especially in longer policy terms.

Whether selecting ACKO term insurance or another term plan with maturity benefit, understanding key elements like date of maturity meaning, policy maturity, and what is maturity in life insurance enables policyholders to make informed decisions for their future.

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.

Point of Difference	Unit-Linked Insurance Plans (ULIPs)	Term Plan with Return of Premium (TROP)	Endowment Plans
Investment Component	ULIPs have a dual purpose, combining life coverage with an investment in equity or debt funds, offering higher return potential but with increased risk.	TROP has no investment component; premiums are returned upon survival of the policy term. This term insurance with maturity benefit offers only life coverage and premium return.	Endowment plans also have an investment component, but the funds are invested in low-risk debt instruments.
Maturity Benefit	Maturity benefits in ULIPs include accumulated returns from the investment component. Partial withdrawals are possible.	In TROP, the maturity sum assured meaning returning the premiums paid if the policyholder outlives the policy term. The maturity benefit meaning here is restricted to premium return, without investment growth.	Endowment plans provide the maturity benefit through sum assured plus bonuses if the policyholder survives the term.
Risk Level	Higher risk due to exposure to market-linked investments.	Low risk, as it’s focused on life coverage without market exposure.	Low to moderate risk, as funds are typically invested in low-risk debt funds, providing stable returns.
Premium Cost	Premiums are generally higher due to the investment component and associated fund management charges.	Premiums in TROP are moderate; they are higher than standard term plans but lower than ULIPs, as they cover the maturity period without additional investment.	Premiums are moderate, covering both life insurance and low-risk investment in debt instruments.
Policy Maturity and Date of Maturity	The date of maturity provides both life cover and investment returns. Policy maturity includes the total of life coverage and any investment value at date of maturity.	A policy is referred to have matured when policy term ends, returning premiums. No investment returns, only premium reimbursement at maturity age.	At policy maturity date or maturity age, the sum assured and accrued bonuses are paid, combining life insurance and modest investment benefits.
Death Benefit	The nominee receives the larger sum which is assured in the event of death within the policy's term.	In TROP, the sum assured is paid upon the policyholder’s death during the policy term, ensuring financial support for dependents.	The sum assured is paid along with any accrued bonuses upon the policyholder’s death during the maturity period.

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 Acko Term Insurance plan include:

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

Find the right plan-->

Conclusion

In conclusion, the maturity age of a term insurance policy marks the end of the policy term, which is when the life insurance coverage ceases. A policy is referred to have matured when policy term ends, indicating that the contract between the insurer and policyholder is complete. In most term insurance policies, this maturity does not include a payout unless additional riders, such as a Return of Premium, are selected.

Understanding the policy term and aligning it with the policyholder’s financial goals is crucial, especially when selecting policies that do not inherently offer maturity benefits. Recognising the role of maturity age allows policyholders to plan effectively, ensuring they choose coverage periods that provide optimal security and support for their family’s future.

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 when 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.