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What is Maturity in Insurance?

When a policy matures, the insurance plan reaches its endpoint. The policyholder pays all the premiums, receives any applicable final amount and benefits, and the insurance transaction is completed.
 

Maturity

Insurance has become an integral part of financial planning for most people. It is the safety net we rely on when the times get tough. However, the maturity of a life insurance policy and other policies is an inevitable part of an insurance contract between an insurer and the insured.
 

Maturity in Insurance is not merely an endpoint but is a prominent milestone in a policyholder’s financial journey. It is the result of the policyholder’s efforts throughout the time period and the completion of a transaction from the insurer’s point of view. 
 

As we delve into this topic, we will try to understand the details of insurance policy maturity amount, maturity benefits, and their implications on your financial planning.

Life Insurance Maturity Meaning

The meaning of maturity in insurance can be better understood by knowing these concepts:
 

Maturity Date:

The date when your insurance matures is called a maturity date, and that is precisely when all the payments are supposed to be completed. After your life insurance matures, the insurance company will pay out a lump sum as the maturity benefit. 
 

Let us say a customer purchased insurance on 1st July 2011 with a policy term of 12 years; the maturity date for the same will be 30th June 2023. 
 

Maturity Amount:

The term "maturity amount" typically refers to the accumulated ro accrued benefits the insurance company decides to provide to the policyholder under the life insurance with maturity benefit. 
 

For example:

In a term insurance plan with a return of premium feature, the maturity benefit will be the accumulated sum of all premiums paid. In some cases, the insurer might offer a minor interest on it.
 

For guaranteed returns insurance plans, the assured sum plus any accrued interest is paid as a maturity payout.
 

For market-linked insurance policies like ULIPs, the maturity benefit is the value of investments on the date of maturity.
 

Only after you have paid all your premiums and the policy term is complete will you qualify for this. A maturity benefit policy also covers the risk of death, protecting your family's future.

How to Avail Maturity Benefit?

Once you have duly paid all the premiums, you attain life insurance maturity. Here is how you receive your maturity amount and benefits, if any. 
 

  • The policy providers send you a Policy Release Form approximately one month before the policy maturity date. 

  • You have to completely fill out the form and include the signatures of 2 witnesses.

  • As your maturity date approaches, you submit the form with the correct information and required documentation. 

  • Finally, check your maturity amount, and on discussing with the providers, transfer it to your bank.
     

This procedure may differ for various companies, hence you will need to follow yours thoroughly. Any kind of error will make it difficult for you to collect your policy amount and benefits.

Additionally, maturity benefits can be paid in various modes:
 

  1. Lump sum: A single lumpsum payout of the applicable maturity amount.

  2. Lump sum + Regular Income: A part of the maturity amount is paid as lumpsum and the remaining part is divided into predecided units and disbursed as per the decided frequency - monthly, quarterly, annually, etc.

  3. Regular Income: The entire maturity amount is paid out in regular payouts.

Various Types of Life Insurance Plans with Maturity Benefits

  1. Term Insurance with Return of Premium: 

    Since term plans are purely protective in nature, they do not provide a maturity benefit. It only provides a reward upon death. However, some term insurance policies return your payments if you live out the policy period.

  2. Guaranteed# Income/Savings Plan:

    A Guaranteed# Income or Savings plan helps you grow your retirement corpus in a way. It assures you of the maturity benefit, which you can use to accomplish your objectives in life. It offers you both general insurance coverage as well as guaranteed# payments in the form of recurring payouts.

  3. Unit Linked Insurance Plans**

    ULIPs or Unit Linked Insurance Plans are market-linked life insurance plans in which a portion of the premium goes to pay for the life insurance, and the other one is invested in the market to yield returns. If you outlive the insurance term, this plan will also offer you a specific amount as maturity benefits. Here, the maturity benefit amount is the same as the fund value amount.

Tax* Benefits on Maturity

Tax Benefits make Insurance policies an attractive choice for long-term savings or security. Not only do insurance plans provide protection, but also give tax benefits on premiums as well as the maturity proceeds. Here are the two tax benefits you may receive:
 

  1. The Section 10(10D) of the Income Tax Act, 1961 provides tax benefits on insurance maturity. The maturity proceeds that the policyholder receives when a life insurance policy matures are tax-free.  However, according to the recent amendment in the budget, any policy issued after 1st April 2023 and having a premium of more than ₹5 lakhs will be taxable.

  2. Under Section 80C of the Income Tax Act, premiums paid towards life insurance policies are eligible for tax deductions. The maximum deduction allowed under Section 80C was ₹1.5 lakh per financial year.

Conclusion:

To say the least, your insurance gives you many benefits. The maturity amount, maturity benefits, and tax* benefits, act as a safety net to your family, or returns on investments, based on the type of insurance policy you own. With the right insurers, term insurance maturity claim on policy maturity is a simple process.

Get complete protection at affordable cost & tax benefits

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Frequently Asked Questions (FAQs)

How is maturity benefit calculated?

You can calculate the maturity benefit for your policy with the help of the following formula. 

Maturity Benefit = Assured Sum Amount (On maturity) + Accrued Bonuses + Any Final Bonus

Can I extend the maturity date of my insurance policy?

The maturity dates of most insurance policies are fixed and cannot be extended. Some plans, however, may offer conversion or renewal options at the conclusion of the term, allowing you to continue coverage under specified conditions.

What happens if the policyholder passes away before the maturity date of a term insurance policy?

If the insured individual dies before the maturity date of a term plan, the policy's death benefit, which is normally a tax-free lump sum payout, is paid to the beneficiaries.

Disclaimers

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  •  Tax: *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • Guaranteed/Guarantee: #Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry.

  • ULIP**:

    • IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

    • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

    • Past performance is not indicative of future performance.

    • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.

    • Please make your own independent decision after consulting your financial or other professional advisor.