When you buy a term insurance with maturity benefit, your premium is split between life cover and the reserve meant for refunding your premiums if you survive the term.
Planning for the future involves more than just saving; it means protecting your loved ones while also ensuring financial returns. That’s where term insurance with maturity benefit steps in. Unlike traditional term plans that only offer a death benefit, these modern term insurance plans provide the added advantage of returning the premiums paid if the policyholder survives the policy term. This makes them a smart choice for individuals seeking both protection and savings in a single policy. With rising financial uncertainties, selecting a term plan that strikes a balance between risk coverage and maturity returns can be a reliable step toward risk-free financial planning.
What Is Term Insurance with Maturity Benefit?
Term insurance with maturity benefit is a unique policy that offers a return of premiums paid if the policyholder survives the term. This means you get back all the money you’ve paid towards premiums, excluding taxes and rider charges, making it a virtually risk-free investment option for those who don’t want to “lose” their premiums.
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These policies ensure your family is financially protected in your absence, just like standard term insurance plans, but they also reward your survival with a maturity payout. It’s this dual benefit that makes them an attractive choice for long-term planners.
How Does It Works?
When you buy a term insurance with maturity benefit, your premium is split between life cover and the reserve meant for refunding your premiums if you survive the term. If something happens to you during the policy term, your nominee receives the sum assured. But if you live past the tenure, all your paid premiums are returned, offering you peace of mind either way.
Of course, this added benefit comes at a cost. Premiums for Term Return of Premium (TROP) plans are typically higher than regular term plans. However, for many, especially those who struggle to maintain a disciplined savings habit, this cost is a small price to pay for assured returns and financial protection.
Key Benefits at a Glance
Here’s why term insurance with maturity benefit stands out in a crowded insurance market:
Guaranteed Returns: You get all your premiums back if you survive the policy term.
Life Cover: Your family is protected with a death benefit in case of an unfortunate event.
Disciplined Saving: For those who find it tough to invest regularly, this acts as a built-in savings plan.
Bonus & Riders: Many policies offer optional riders like critical illness or disability cover for enhanced protection.
Tax Benefit
Let’s take the example of Ramesh, a 35-year-old IT professional who pays Rs. 25,000 annually for a term insurance with maturity benefit and falls under the old tax regime. His plan tenure is 25 years.
Under Section 80C, Ramesh can claim tax deduction up to Rs. 1.5 lakhs annually for the premium paid.
Assuming he continues the policy without a break, over 25 years, he will have paid Rs. 6.25 lakhs in total.
If he survives the term, the entire Rs. 6.25 lakhs could be returned tax-free under Section 10(10D).
Now, imagine if he hadn’t taken the plan. Not only would his family be financially unprotected in his absence, but he would also lose the chance to save Rs. 46,800 annually in taxes (assuming a 30% tax slab). That's over Rs. 11.7 lakhs in 25 years when reinvested.
Clearly, Ramesh’s choice of a term insurance with maturity benefit helps secure both his family’s future and his financial goals.
How To Pick The Right Plan?
If you’re convinced this type of policy is right for you, here are a few things to keep in mind:
Goal Alignment: Ensure the plan meets both your protection and savings objectives.
Policy Tenure: Pick a term that aligns with your earning years or life goals.
Coverage Amount: Consider liabilities like home loans, education expenses, and daily family needs.
Compare Premiums: Evaluate the cost-to-benefit ratio with regular term insurance plans.
Rider Options: Look for critical illness or accidental death riders to enhance your coverage.
Insurer Credibility: Check the claim settlement ratio and customer reviews.
When Is a Maturity Benefit Term Plan Ideal?
A term insurance with maturity benefit may be ideal if:
You want guaranteed returns in the absence of a claim.
You’re risk-averse and want to avoid pure market-linked investments.
You want a single product that covers insurance and savings.
You are not confident about independently managing mutual funds or SIPs for long-term gains.
Conclusion
Most people view term insurance as a cost. However, a term insurance with maturity benefit becomes a financial asset. It’s not just about securing your family’s future; it’s about rewarding your financial discipline and providing you with a stress-free way to plan your long-term goals.
Whether you’re starting a family, planning for your children’s education, or just looking for guaranteed returns with protection, this smart insurance tool deserves a place in your portfolio.
Brands like Aviva India offer comprehensive TROP plans that cater to both protection and financial planning needs, helping you build a future that’s not only secure but also rewarding.