Life insurance products, although a necessary financial tool, are never easy purchase/sell. As policyholders, purchasing a life insurance plan means that you are getting financially prepared in case you pass away during the tenure of the policy. But what if, by God’s grace, you do survive the policy?
Imagine this -
Rohit is a 30-year-old non-smoker who purchased a term insurance policy and kept his spouse as his beneficiary. He used the free calculator to calculate his ideal term insurance coverage and opted for a ₹1 crore policy till he turned 65 years old. His premiums come to ₹₹12k - ₹16k. Now, thanks to his healthy lifestyle and great luck, he stands strong at 65 years old. Now, while his family wasn’t deprived of his presence, he made a smart financial move by staying financially prepped for the “chance” situation.
However, now that he has survived the term policy tenure, he can’t help but wonder, “What did I get from this coverage? Was it too much of a loss?”
Now, it’s true that he has enjoyed a financial shield that would have kicked in in case he passed away by 65, but since he hasn’t, such doubts are inevitable.
To cater to such questions and boost the purchase of term insurance policies, insurers now offer an added feature: maturity benefits as a term insurance rider. Usually, by definition, term insurance plans do not provide any returns, and this includes the maturity perk. However, to compete with the growing popularity of ULIPs and Endowment policies and the evolving financial requirements of existing and potential policyholders, providers now also offer term insurance plans with maturity benefits (or Return of Premiums).
The most important question is, should you opt for term insurance policies with maturity benefits? What are the best term insurance plans offering maturity benefits? Here’s all you need to know about these policies!
Best Term Insurance Plans with Maturity Benefits
| Best Term Insurance Plans | Coverage Offered | Features of the plan | Drawbacks of the plan |
|---|---|---|---|
| HDFC Life Click2Protect Super | ₹50 lakhs |
|
Expensive as compared to other plans in its category |
| Max Life Smart Secure Plus | ₹50 lakhs |
|
NONE |
| Bajaj Allianz Smart Protect Goal | ₹50 lakhs |
|
No Waiver of Premium, Inflation Shield, Accidental Death Benefit, Terminal Illness Benefit, or option to boost cover amount. |
| Tata AIA Sampoorna Raksha Supreme | (depends on the underwriting team) |
|
None |
What are Term Insurance Plans with Maturity Benefits?
Term insurance plans with maturity benefits offer a unique perk of reimbursing all your premiums, excluding the GST and the rider premium, provided you survive the policy tenure.
Now, this can be a pretty lucrative and value-worthy term insurance rider, considering that you have opted for a term insurance policy to cover you until you are 65 or 70 years old. This makes sense because you have a higher life expectancy under such an age slab. This partially ensures that you get the return of the premiums.
On the flip side, think of this - why would a top-notch term insurance provider offer you this return? Considering the term insurance premiums may add up to lakhs (taking the example from before ₹16k * 35 years = ₹5.6 lakhs approximately), why would the insurers offer you such high returns, thereby increasing and almost assuring a higher risk of payouts?
Well, the answer is simple: in the case of the Return of Premium Riders, the overall term insurance premium amount goes up substantially. Whether this spike in premiums outweighs the savings made over the return of premiums or not is a customised choice for policyholders. You must also consider your current financial bandwidth and check if you can afford that high premium or would rather spend the additional amount towards an investment channel or the base premium to get a higher cover.
What are the Best Term Insurance Plans with Maturity Benefits?
Let’s say you have finalised upon opting for a Return of Premium rider with your term insurance policy. Under such circumstances, you will need to spot the best term insurance plan offering a Return of Premium Rider. Here’s how to do this -
- Finalise upon a credible term insurance provider: Since, in the case of term insurance policies, you are dealing with a substantial sum assured that would act as your income replacement in the case of your unfortunate absence, you need a credible insurer that offers you a hassle-free claim settlement process. So, check these factors before finalising a term insurance provider - a Claim Settlement Ratio of 97% and above, an Amount Settlement Ratio of 90% and above, and a low complaint volume.
- Select the perfect term insurance plan: While prioritising the Return of Premium Rider as a feature of your term insurance policy, that can’t be the only feature you compare when choosing a plan. You must also ensure that the policy has a few crucial features like - inbuilt terminal illness benefit, substantial coverage at affordable premiums, and value-worthy riders like Critical Illness Benefit, Waiver of Premium, Accidental Death Benefit, Accidental Total and Permanent Disability Rider, Life Stage Benefit, and Increasing/Decreasing Cover Rider.
Accordingly, here’s a look at the best term insurance policies with maturity benefits -
- HDFC Life Click2Protect Super: Click2Protect Super is a term insurance policy known for customisation options. The plan is comprehensive, and HDFC's strong reputation contributes to its inclusion in our list of recommended plans.
Key features of the plan include:
- Critical Illness Benefit: Provides an additional sum if diagnosed with any of the listed critical ailments, which can be used for treatment, savings, and more.
- Zero Cost Option: If you choose to forgo your policy on a specified date, this rider will return your premiums in full (minus GST).
- Accidental Death Benefit: Provides an additional sum to the family if the policyholder's death is due to an accident.
- Inflation Protection: Increases your coverage amount in line with the inflation rate.
- Waiver of Premium: Waives the need to pay premiums if you become permanently incapacitated or suffer from a critical ailment.
- Total Permanent Disability Benefit: If you are permanently disabled, this benefit provides a lump sum or monthly instalments, ensuring the smooth running of daily household expenses.
Drawbacks: Like other HDFC plans, this policy is relatively expensive.
2. Max Life Smart Secure Plus: Smart Secure Plus from Max Life is arguably the best term insurance policy available. It offers a wide range of riders for maximum customisation, and the insurer's strong reputation in the industry makes this plan particularly popular.
Key features of the plan include:
- Voluntary Top-Up Sum Assured Option: Allows you to increase your coverage up to 100% when needed, unlike many other term insurance plans.
- Inflation Shield: This rider ensures your coverage amount grows in line with year-on-year inflation.
- Critical Illness Benefit: Covers multiple critical ailments, providing additional coverage if diagnosed with any of these conditions.
- Terminal Illness Benefit: Offers an additional amount beyond the sum assured if diagnosed with a terminal condition.
- Return of Premium: If you survive the policy term, the insurer will return the accrued premium as a Special Exit Value.
- Accident Cover: Provides an additional death benefit if the policyholder dies due to an accident.
- Waiver of Premium Plus Rider: Waives premiums in case of disability or critical illness, keeping the policy active.
Drawbacks: We couldn’t identify any significant drawbacks to this plan, making it one of our top recommendations.
3. Bajaj Allianz Smart Protect Goal: Bajaj Allianz Smart Protect Goal is a cost-effective choice for those seeking extensive coverage. The plan includes several riders and unique benefits, such as relatively lower premiums for smokers compared to industry standards. However, it lacks some essential features like the Zero Cost Option.
Key highlights of the plan include:
- Critical Illness Benefit: Covers 55 critical ailments. If diagnosed with any of these, you receive an additional amount to use as needed. Note that there is a 180-day waiting period for this benefit.
- Return of Premiums: If you survive the term of the Bajaj Allianz Smart Protect Goal, you get a full return of your paid premiums.
- Whole Life Cover: Provides financial protection until the age of 99.
Drawbacks: However, the policy has some drawbacks, including the absence of the Zero Cost Option, Waiver of Premium, Inflation Shield, Accidental Death Benefit, Terminal Illness Benefit, and options to enhance coverage as needed.
4. TATA AIA Sampoorna Raksha Supreme: TATA AIA Sampoorna Raksha Supreme is among the most affordable plans available. The policy offers excellent riders for customisation, coupled with TATA AIA’s strong industry reputation, making it an outstanding choice.
Key features of the plan include:
- Life Stage Benefit: Allows you to increase your coverage for significant life events, a notable advantage as most term insurers do not allow changes to existing plans.
- Criticare Plus Benefit: Provides additional coverage if diagnosed with any of 40 critical ailments on the insurer's list.
- Whole Life Cover: Offers coverage until age 100, though it may not be necessary as dependents will likely be financially reliant by then.
- Top-Up Sum Assured: This increases the base amount by 5% on every policy anniversary, given that the premium payment term is at least five years.
- Terminal Illness Benefit: Provides a lump sum of up to 50% of the base sum assured upon diagnosis of a terminal condition, known as the Payor Accelerator Benefit.
- Lower Premium for Women: Offers discounted premiums for women policyholders.
- Wellness Program: Includes a discount on first-year rider premiums and complimentary annual health check-ups.
- Return of Premium: Returns the accumulated premium as a Special Exit Value if you survive the policy duration.
Drawbacks: None
Should You Buy Term Insurance Plans with Maturity Benefits?
Honestly speaking, no.
Hear us out - while term insurance policies with maturity benefits sound like an incredible perk and value-worthy, it’s not. First, term insurance plans are primarily popular because of their affordability. If your premiums become too high, it defeats the purpose. Secondly, the accrued premium margin becomes a complete waste if the policyholder dies during the plan's tenure.
We recommend purchasing pocket-friendly vanilla term insurance policies and opt for lucrative riders like Critical Illness Benefits, Waiver of Premium, and Life Stage Benefits.
What is the difference between zero cost and maturity benefits in term insurance?
Zero Cost term insurance plans have been quite the marketed rider for most term insurance plans. And by definition, it sounds much like a maturity benefit. However, there’s a slight difference -
| Features | Zero-Cost Term Insurance Plans | Maturity Benefits/Return of Premiums |
|---|---|---|
| Similarity |
|
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| Difference |
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Conclusion
Term insurance plans with maturity benefits have become a popular financial product among existing and potential policyholders. However, once you weigh the advantages and disadvantages of term insurance policies with maturity benefits, you will soon realise that opting for Return of Premium Rider is not a smart financial move. You would be paying pretty high premiums that could affect your financial health.