What is Endowment Plan Maturity?
Like all life insurance plans, endowment plans also come with a pre-determined tenure. When this tenure expires, your endowment policy is said to have matured. For instance, if you opt for an endowment plan with a 15-year tenure, you will receive the maturity benefits from the plan when this tenure ends. In other words, you stand to receive the return amount from such policies. If you are alive when the policy matures, the maturity benefits listed under the plan will directly accrue to you. However, if something untoward happens to you during the policy tenure, the death benefit of the plan will be given to the nominees named in your policy document.
Benefits You Receive at Maturity
Your participating endowment maturity benefits will include the following –
Sum assured and bonuses (if any)
It is important to note that this maturity benefit includes the sum assured as well as the revisionary bonuses and any final bonuses that may have accrued to your policy. This total endowment maturity benefit will be paid to you as a lump sum amount or periodic income depending on the policy terms and conditions.
For instance, if you have an endowment policy with a sum assured of 1,00,000, upon maturity, you will be entitled to this 1,00,000 as well as other cumulative bonuses (if any) your plan has earned over the years. Some plans offer you around 115% of the sum assured when the policy matures, provided that all your premium dues have been cleared.
The maturity benefit you derive from an endowment plan will depend on a host of factors like the kind of plan you pick and the length of the policy tenure. For instance, if you pick a non-profit endowment plan, you won’t qualify for any additional bonuses over and above the predetermined benefit amount for your policy. Also, know the difference between survival benefit vs maturity benefit. The former is paid in money-back plans during the policy tenure while the latter is paid at the end of the policy term.
Other Benefits of Endowment Plans
While people tend to think of maturity benefits as the sole end goal of an endowment plan, the truth could not be more different. Apart from the sizable endowment maturity benefits, you also stand to derive a set of other benefits from such plans. Let’s have a look at these additional benefits:
Death Benefit
Since endowment policies are insurance-cum-investment products, you are entitled to a life cover under such plans. This implies that your loved ones will receive a guaranteed payout if you happen to pass away before the end of the policy term, provided all due premiums are paid. This lump sum payment can be used by your dependents to meet necessary expenses and maintain their financial stability even in your absence. For instance, in a child endowment policy, the death benefit can be used by the child to meet its financial needs.
Add-on Rider Benefits
Endowment benefits can be further enhanced with effective add-on riders on payment of nominal extra premium. Each of these riders offers a payout when the contingency linked to them occurs. For instance, if you opt for a critical illness rider and are subsequently diagnosed with a critical illness during the policy term, you will stand to derive the payout benefits listed under this rider as per rider conditions. This payout can be used to ensure that your treatment costs are covered or to act as a supplementary source of income if the ailment impairs your ability to earn a living. Similarly, accidental death, complete or partial disability, waiver of premium and family income benefit riders are some of the most common add-ons you can opt for. However, it is important to note that every add-on rider comes against a nominal cost addition to your base premium amount.
Tax Benefits
Under Section 80(C) of the Income Tax Act of 1961, you will be entitled to deduction of the premiums you pay for the endowment plan subject to the provisions stated in the said Act. Maturity or death benefit received under endowment policy is exempt, subject to satisfaction of conditions mentioned under Section 10(10D) of Income Tax Act.
Steps to Ensure You Receive Your Maturity Payout on Time
Follow these steps to receive the payout without any delay after the endowment policy maturity
Keep Your Personal Information Updated
Make sure to provide updated information regarding your address, phone number and other personal details to avoid delays in communication when your policy is due for payout.
Verify Assignee Details (If Applicable)
If you have used your policy to get a collateral loan, the ownership rights will be transferred partially or fully, and the lender will become the assignee. You can also assign the policy to your loved ones if you want. If the policy has an assignee, the life insurance company would verify the same before claim payment.
Ensure Your Bank Account Details Are Correct
Cross-check your bank account number, IFSC code, and branch details provided to the insurer and ensure they are accurate.
Key Takeaways
- An endowment policy matures when the chosen tenure ends. If you survive till maturity, the maturity benefit is paid to you. If not, the death benefit goes to your nominees.
- Maturity benefits can be received as a lump sum or periodic income, depending on the policy. These funds are useful for retirement planning.
- Endowment plans provide life cover, have the option of addition of add on riders (like critical illness rider, accidental death and disability rider, waiver of premium rider, etc.), subject to availability with base plan, and tax advantages under Section 80C under the Old Tax Regime and 10(10D).
- Keep your personal details updated, verify assignee details if applicable, and ensure your bank account details are correct to avoid delays in receiving the maturity amount.
Wrapping It Up
In some cases, you may have to surrender your endowment plan before it matures to meet a financial emergency. While you will be entitled to the surrender value of the plan (if the premiums for a certain number of years have been paid), this payout will be considerably less than the amount you stand to receive when the plan matures.
Thus, it is always preferred to refrain from surrendering your endowment plan before its maturity date as doing so eliminates your claim on the endowment maturity benefits under the plan and may hamper the safety net you were trying to guarantee for your family.
FAQs
What is paid at the maturity of an endowment policy?
At the maturity of an endowment policy, if you survive the policy term, the maturity benefits (sum assured + accumulated bonus (if declared), in case of participating products) are paid. If you had a non-participating endowment plan, the maturity benefit would be the sum assured including any other additions added under the plan.
How long does it take to receive the maturity amount?
Usually, insurers pay the maturity amount quickly if the documentation is in order. However, the exact time for receiving the maturity proceeds depends on the insurer. You can check with the company the timeline within which the maturity amount would be paid.
Are maturity proceeds from an endowment policy taxable?
The maturity benefits of the endowment plan can be tax-free under Section 10(10D) if specific terms and conditions are fulfilled. Check the premium amount and the date of buying the policy to claim the endowment plan tax benefits.
What if the life assured of an endowment plan dies before maturity?
If the life assured dies before maturity, the death benefit would be paid. This benefit would be paid to the nominee.
