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Is there any Maturity Benefit in Term Insurance Plans?
Jul 07, 2017 | 311 VIEWS
The answer is NO. Term insurance plans have no maturity benefit and there is a reason for it. Term insurance plans are the purest form of insurance. It works like this - you pay an annual premium to the insurance company. In return the insurance company guarantees you a huge amount of cover. In case nothing happens to you, you will not get any money back. 
Essentially you are paying your annual premiums to maintain a huge life cover for yourself.. in case nothing happens you really don’t get the premiums back. 

A lot of people find this weird - i am paying for something but i am not claiming it because i am alive. So I should be getting the money back. Well the insurance company is actually promising to pay you a life cover. In case something happens to you they pay out a really large amount of cover.

Let me give you an example. In a traditional investment plan you get a 5 lakh cover for a 30 year old male who is healthy for lets say 20 years. Then the premium will be in the range of Rs. 25,000 - 29,000 annually. For a 5 lakhs life cover the same 30 year old healthy male gets a crore covers for a premium of Rs. 6,000 - 7,000 per year. So if you actually look at it the amount of cover provided here is a crore and in an investment plan it is just a 5 lakhs cover. Let's take a scenario where the policyholder dies. You will be paying Rs. 30,000 a year and all that your family gets is actually a 5 lakh payout. In term insurance, where you have been paying Rs. 6,000 -7,0000 the nominee gets Rs. 100,00,000. That is the kind of cover that you actually should take through a life insurance plan.

Please understand there is a difference and it is not a fair comparison wherein you know you are going for an investment plan by paying a very large amount of premium. And in term insurance, you are actually getting a very very large life cover for a small amount of premium. It's not fair to actually expect returns out of a term insurance plan. 

However, there are a few term insurance plans which have been designed for those who still want their premium back in case nothing happens to them. It's called TROP (Term with Return of Premium). In case nothing happens to you the premiums are paid back to you. I personally would not recommend that you go in for such plans because it turns out to be much costlier than normal term insurance plans. 

Go in for a pure term plan for your family in which you pay an annual premium and get a very large amount of cover. Think of a scenario where you are not there - your family will need that huge amount of cover. That's why a term insurance plan is probably the best investment that you will make.

I hope this was useful to you thank you. 

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