Understanding Life Insurance Maturity And Its Benefits

Life insurance is an important financial safety net for you and your loved ones. It's natural to wonder what happens when your policy reaches maturity. In simple terms, maturity in life insurance means that a permanent life insurance policy has reached its maturity date. This date marks the end of the policy, and the benefits you receive will depend on the type of insurance you have. Term life insurance, for example, does not have a maturity date but rather an expiration date, after which the policyholder can renew or purchase a new policy. Permanent life insurance, on the other hand, is designed to last your entire life but still has a maturity date, usually when the policyholder is between 100 and 121 years old. Understanding the specifics of your policy is crucial to making informed decisions about your financial future.

Understanding the maturity date

The maturity date is the date when your insurance policy reaches its endpoint and comes to an end. This is the date when you, as the policyholder, will have paid all the premiums, received any applicable final amount and benefits, and the insurance transaction is completed.

For example, if you purchased insurance on July 1, 2011, with a policy term of 12 years, the maturity date would be June 30, 2023. On this date, you will receive a payout or maturity benefit from the insurance company. This maturity benefit is typically a lump-sum payment, but it can also be paid in other ways, such as in regular instalments.

The maturity date varies depending on the type of insurance policy you have. Term life insurance, for instance, does not have a maturity date but rather an expiration date, which is the end of the term chosen by the policyholder. Permanent life insurance policies, on the other hand, are designed to last for the lifetime of the insured but also have a maturity date, usually when the policyholder is between 100 and 121 years old.

It is important to note that the process of receiving your maturity benefit may differ depending on the insurance company. In general, you will receive a Policy Release Form from your insurance provider about a month before your policy matures. You will need to fill out this form completely and have it signed by two witnesses. Then, a few days before the maturity date, you will submit the form along with any required documentation to the insurer. Finally, you will receive your maturity amount, which you can transfer to your bank.

Types of maturity benefit plans

Maturity benefit plans are a great way to ensure your family's financial security and can also act as a savings or investment tool for policyholders. Here is a list of the three most common types of maturity benefit plans:

Term Insurance with Return of Premium (TROP) Plans:

If the policyholder survives the policy term, TROP plans offer the additional benefit of returning the premiums paid. This type of plan provides both financial protection and savings accumulation, making it a unique and attractive option. The premiums for TROP plans are typically higher than those of pure term plans, but they offer the advantage of a refund upon survival.

Linked Endowment Plans:

Linked endowment plans combine investment and insurance. While the guaranteed amount may not be substantial, these plans offer lower risk and more reliable returns as funds are invested in debt instruments. Traditional non-linked endowment policies provide a lump-sum payment of the assured sum to the policyholder as a maturity benefit or to the beneficiary as a death benefit.

Unit Linked Insurance Plans (ULIPs):

ULIPs are market-linked life insurance plans that offer both insurance coverage and investment opportunities. A portion of the premiums is used for life insurance, while the rest is invested in financial instruments such as equity or debt. ULIPs are susceptible to market forces, and the investment risk is borne by the policyholder. If the policyholder survives the maturity period, the maturity benefit amount is equal to the fund value.

It's important to carefully consider your needs, financial goals, and risk tolerance when choosing a maturity benefit plan. Each type of plan has its own advantages and features, so be sure to review the details of each plan before making a decision.

Advantages of a term life insurance plan

Term life insurance is a good option for people who want substantial coverage at a low cost. It is beneficial to families with low or fluctuating incomes. It offers benefits such as tax deductions, reducing the number of annual premiums to be paid. The policyholder can withdraw the plan at any time if they are unable to pay. It also has riders for critical illness, accidental death, and other assistance.

Term life insurance is attractive to young people with children. Parents can obtain substantial coverage for a low cost, and if the insured dies while the policy is in effect, the family can rely on the death benefit to replace lost income. These policies are also well-suited for people with growing families, as they can maintain the coverage needed until their children reach adulthood and become self-sufficient.

Term life insurance is usually the least costly life insurance available because it offers a death benefit for a restricted time and doesn’t have a cash value component like permanent insurance. For example, a healthy, non-smoking 30-year-old man could get a 30-year term life insurance policy with a $250,000 death benefit for an average of $18 per month as of October 2024. At age 50, the premium would rise to $67 a month.

Term life insurance is a relatively inexpensive way to provide a lump sum to your dependents if something happens to you. It can be a good option if you are young and healthy and support a family. It is also a good option for people who cannot afford or will not pay the much higher monthly premiums associated with whole life insurance.

How to claim maturity benefits

The process of claiming maturity benefits from a life insurance policy is relatively straightforward, but it may vary slightly depending on the insurance company. Here is a general guide on how to claim maturity benefits:

Eligibility to Claim

To be eligible to claim maturity benefits, the following criteria must be met:

• All premium payments on the life insurance plan must be up to date.
• The policy must be 'alive', i.e., still valid and not have expired or been cancelled.
• The policyholder must have all the necessary documents to make the claim.

Documents Required

When claiming maturity benefits, the policyholder will need to submit the following documents:

• Original life insurance policy document
• ID proof photocopies (e.g., PAN card, Aadhaar Card)
• Address proof documents
• Bank details, including a bank mandate form and a cancelled cheque leaf from an active account
• NEFT mandate (if opting for a bank transfer)

It is important to ensure that all documents are submitted to the insurance company at least seven working days before the policy's expiry date.

Procedures for Claiming Maturity Benefits

The process of claiming maturity benefits typically involves the following steps:

• Obtain the Policy Release Form: The insurance company will usually send this form to the policyholder about a month before the policy matures.
• Fill Out and Submit the Form: The policyholder must fill out the form completely and accurately, including the signatures of two witnesses. The form, along with all the required documentation, should be submitted to the insurer a few days before the maturity date.
• Verify Information and Receive Payment: After receiving the completed form and documents, the insurance company will verify the information and initiate the transfer of the maturity amount to the policyholder's bank account. Alternatively, the policyholder can request that the insurance company send a post-dated cheque to their address.

It is important to note that the specific procedures for claiming maturity benefits may vary depending on the insurance company and the type of policy. Policyholders should carefully review their policy documents and contact their insurance provider for detailed instructions on how to claim maturity benefits.

Things to do if your term insurance policy is about to mature

If your term insurance policy is about to mature, there are several things you can do to ensure continued coverage and financial protection for yourself and your loved ones. Here are some important steps to take:

• Renew your existing policy: If your insurance provider offers a renewal option, consider renewing your term insurance policy to extend your coverage for another term. This will provide continued financial protection for your loved ones. Keep in mind that renewal options may result in significantly higher premiums.
• Opt for a return of premiums: Some term insurance policies offer a return of premiums option, where you can receive a refund of the premiums paid if you outlive the policy term. This allows you to recoup some or all of the premiums paid.
• Convert to a permanent policy: Explore the possibility of converting your term insurance policy into a permanent life insurance policy, such as whole life or universal life insurance. Permanent policies offer lifetime coverage and may provide additional benefits such as cash value accumulation.
• Extend your coverage: If you still need life insurance coverage but your existing policy is about to mature, consider extending your coverage by purchasing a new term insurance policy with a longer term or higher coverage amount.
• Shop around for a new policy: Compare quotes from different insurance providers to find the best coverage options and premiums that fit your needs. Consider factors such as the coverage amount, policy term, and premium affordability.
• Combine multiple policies: If you have multiple term insurance policies with different insurers, consider consolidating them into a single policy with one insurer. This can simplify administration and may result in cost savings.

It is important to proactively make decisions regarding your insurance coverage to ensure that you and your loved ones remain protected. Consult with your insurance provider or financial advisor to navigate the decision-making process and choose the best course of action based on your circumstances and financial goals.

Frequently asked questions