Maturity Benefits in Life Insurance: Everything You Need to Know

What if your life insurance plan could reward you for staying consistent with your savings? For many people, life insurance is only about financial protection for their families in case something unfortunate happens. But certain types of plans also give you a financial payout when the policy term ends - known as maturity benefits. This feature appeals especially to those who see insurance as part of their long-term wealth strategy. Understanding how these benefits work can help you pick a policy that not only safeguards your loved ones but also builds value over time.

What Are Maturity Benefits in Life Insurance?

A maturity benefit is the amount you receive when your life insurance policy reaches the end of its term and all your premiums have been paid on time. In simpler terms, it’s the insurer’s way of returning value based on your financial discipline throughout the policy period.

The payout you receive may include the sum assured on maturity (the guaranteed amount specified in the policy), along with any bonuses or loyalty additions, depending on the type of plan you’ve chosen.

This benefit applies only if the policyholder survives the term - it’s different from a death benefit, which goes to the nominee in case of their passing.

How Is the Maturity Benefit Calculated?

The calculation of your life insurance maturity value depends on three main components:

Sum assured on maturity:

The guaranteed payout mentioned in your policy document.

Bonuses:

Many participating plans declare reversionary bonuses (added periodically) and terminal bonuses (paid at the end of premium paying term or policy term).

Loyalty additions:

Some insurers reward long-term customers with an additional amount at maturity.

Let’s look at a simple example. Suppose you buy a 15-year life insurance plan with premium paying term of 8 years with a sum assured of ₹10 lakh and pay an annual premium of ₹1 lakh. By the end of the term, you could receive around ₹12 lakh –₹13 lakh depending on the bonus rates applicable at that time.

This value represents your maturity benefit - a mix of guaranteed and variable components that accumulate throughout your policy period. You can also estimate your returns using a maturity calculator or refer to the detailed maturity value in the insurance guide.

Note: The actual maturity amount depends heavily on the insurer’s bonus declaration and the plan’s specifics. This example maintains the required premium-to-sum-assured ratio for tax exemption under current laws.

Types of Life Insurance Plans That Offer Maturity Benefits

Not every policy comes with a maturity benefit. Term insurance plans, for instance, are primarily designed for protection, and a pure term plan will not have maturity benefits. However, several variants combine life cover with savings or guaranteed returns.

Endowment Plans:

These plans provide life cover and a lump-sum payout at maturity if you survive the policy term. They’re ideal for those looking to combine protection with disciplined savings for long-term goals such as a child’s education or other big purchases.

Money-Back Plans:

Instead of a single payout at the end, these policies give periodic returns during the term, usually every few years, and pay the remaining balance at maturity. They suit individuals who prefer regular liquidity while staying insured.

Return of Premium Term Plans:

If you like the simplicity of term insurance but also want your premiums back, this option works well. You receive a full refund of all base premiums paid (excluding any rider premiums) if you outlive the policy term. Here’s where you can learn more about return of premium term plans.

Guaranteed Savings and Income Plans:

These combine life cover with predictable returns. For instance, a guaranteed savings plan offers assured maturity value, while an income insurance plan provides a steady income for a chosen period. Both are designed to help you meet future milestones with financial certainty.

Tax Benefits on Maturity Proceeds

Under Section 10(10D) of the Income Tax Act, 1961, the maturity amount from a life insurance policy is generally exempt from tax if certain conditions are met. It’s important to note that tax rules are subject to change, so it’s wise to review current guidelines or consult a tax advisor before making a decision.

Why Maturity Benefits Matter

Maturity benefits provide a structured way to build long-term savings while staying insured. They help you achieve major life goals such as funding your child’s higher education, planning for retirement, or creating a financial cushion for emergencies.

They also promote financial discipline. Since premiums are paid regularly over several years, you end up cultivating a savings habit that brings tangible rewards at the end of the policy period. Moreover, the predictability of a maturity payout can bring security - you know exactly when and how much you’ll receive, allowing you to plan ahead.

Conclusion

Maturity benefits turn life insurance into more than just a safety net, creating a future fund built on your consistency and foresight. Whether you prefer a return of premium plan, a guaranteed savings option, or a regular income plan, choosing the right policy can make your insurance work for you in more ways than one.

Explore Bandhan Life’s range of life insurance solutions that combine protection with assured maturity value to help you meet life’s milestones confidently.

Frequently Asked Questions

1. What is a maturity benefit in life insurance?

It’s the amount you receive when your policy term ends, provided all premiums have been paid and the policyholder is alive. It can include bonuses and guaranteed additions depending on the plan.

2. Which life insurance policies offer maturity benefits?

Endowment, money-back, return of premium, and certain guaranteed savings or income plans typically provide a maturity value. Pure term insurance policies usually don’t.

3. How is the maturity amount calculated?

It’s based on the sum assured, any accrued bonuses, and loyalty additions, minus applicable charges. Each insurer follows its own formula, which is detailed in the policy document.

4. Is the maturity amount taxable in India?

Generally, it’s exempt under Section 10(10D) if your annual premium is less than 10% of the sum assured on death. Always check the latest tax rules for confirmation.

5. How is maturity value different from cash value?

Cash value refers to the accumulated value you can surrender, withdraw or borrow during the policy term, while maturity value is the final payout you receive at the end of the term.