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Need assistance in choosing the right insurance plan? Get a call from our Expert.

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TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in. T&C apply.

Does Term Life Insurance Plans Offer Cash Value?

A term insurance plan is a pure protection plan that offers death benefits to the nominees of the policyholder in case of the latter’s unfortunate demise. Most term insurance policies do not offer a cash value or a maturity benefit.
 

There have been questions in people’s minds regarding the cash value of a term insurance policy. If you have such questions in your mind, let us help you find out the answers!
 

What is Cash Value in a Life Insurance Policy?


Cash value is a feature of permanent life insurance policies. Cash value is the part of your policy on which you can earn interest, and it may be available for you to withdraw in an emergency. The policyholder can also take a loan against the cash value of the insurance policy.
 

Does Term Insurance Policy Have a Cash Value?


Term insurance policies in India do not have a cash value. Term insurance policies are pure protection plans that do not have a savings component. These plans are an effective way to ensure that your family is financially protected in case of your untimely demise.
 

The premium that you pay towards a term insurance policy is only a fraction of the premium you pay for other insurance plans. There is no cash value in a term insurance plan to ensure that the insurance plans offer adequate life cover and are affordable. Also, the premiums that you pay towards a term insurance policy are deductible from your taxable income.
 

Moreover, having a term policy ensures peace of mind as you will be sure that your family can fulfil their dreams and aspirations even when you are not there.
 

However, there are a few ways term insurance plans can yield finance for you.
 

How Can You Fund Your Needs Through a Term Insurance Policy?
 


There are a few ways to use the term insurance plan to fund your needs.
 

  • Complete policy surrender

    Surrendering the insurance policy means terminating the policy. The amount that the insurer provides to you when you surrender the policy is called the surrender value. The value is calculated based on the premium amount paid less the surrender charges that the insurer has mentioned. Every insurer has a different way of calculating the surrender value.
     

Along with these, there are other benefits of term insurance that you must know about.
 

Benefits of Term Insurance Policy


There are various benefits of having a term insurance plan. These are listed below.
 

  • More sum assured

    Term plans provide moresum assured at affordable prices. Term insurance costs are based on providing death benefits to the nominee rather than providing investment and savings benefits. So, with a term plan, the nominee of the policy will get death benefits in case of your untimely death, but if the policyholder survives the term of the policy, there is no maturity benefit.

    Also, at Tata AIA, we offer Life Stage Option, which helps you increase the life cover at important stages in your life. For instance, you can increase the cover when you get married or have children. The more sum assured will ensure that your family’s goals are fulfiled even when you are not there.

  • Optional riders#

    Term plans provide death benefits in case of natural death, accidental death, etc. But you can opt for riders# to enhance the coverage offered by your term policy.

    With the comprehensive protection rider#, you will get additional coverage for events like accidental death, total and permanent disability, etc. In addition, it will increase the death benefits and provide enhanced financial assistance to you and your loved ones. You have the option of receiving the benefits as a lump sum, regular income for a specified period, etc.

    With the comprehensive health rider#, you will get financial assistance if diagnosed with cancer, kidney failure, etc. It includes hospitalisation expenses for major and minor illnesses and injuries. You can receive the payout as a lump sum or regular income or a lump sum and regular income.

  • Return of premium2

    Although most term plans do not offer maturity benefits, you can opt for a term policy with a return of premium. This is the benefit that the policyholder will get if they survive the policy tenure. The premiums paid towards the policy will be returned to the policyholder when the policy matures.

    At Tata AIA, you can opt for a return of premium2 option. An amount equal to 105% of the total premiums paid is provided as the maturity benefit to the policyholder if the policyholder survives the policy tenure.

  • Tax* benefits

    You can also avail of tax* benefits on the term insurance. The premium amount paid towards the term plan and its benefits qualify for the tax* deduction and tax* exemption under Section 80C and Section 10(10D) of the Income Tax Act, 1961.
     
Conclusion


Purchasing a term insurance policy is beneficial for you in more ways than one. In your absence, it will provide financial assistance to your family so that they can take care of their needs. Though a term plan lacks the feature of cash value, it can still be advantageous for you.


If you have a term insurance policy and require funds, you can use it in the ways mentioned above to generate the funds you need. Moreover, if you are looking for maturity benefits, you can opt for a term plan with a return of premium2.
 

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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

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 the 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.
  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch
  • 2Under Life Plus Option, an amount equal to the 105% of the Total Premiums Paid (excluding loading for modal premiums) shall be payable at the end of the Policy Term as Maturity Benefit, provided the life assured survives till maturity and the policy is not terminated earlier.
  •  *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.