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What Will Happen When a Term Life Insurance Policy Matures?

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What Will Happen When a Term Life Insurance Policy Matures?
July 22, 2022

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Term insurance plans are known for offering high sum assured amounts at pocket-friendly premiums. When people start earning, they choose term policies as they are one of the most attractive and affordable insurance plans available in the market. Unfortunately, term policies do not offer additional maturity benefits. These policies come with an expiry or maturity date. If the policyholder outlives the tenure, they do not receive a large payout or bonus. If you have a term plan, do not despair.

Let’s look at what you could do if your term insurance policy is about to mature:

Renew the Policy

You may have bought a 30-year term plan when you were in your early 20s to help your parents pay off some outstanding debt. Over time, you got married and started a family of your own. You now have even more financial responsibilities than before and would like to keep your policy going for longer. You can opt to renew the policy and extend the period. If you choose this, you will likely have to pay a higher premium since you are older and perhaps not in the same health condition as when you bought the initial plan.

Opt for Return of Premiums

To make these policies more beneficial for policyholders, insurance companies now offer term plans with maturity benefits. The maturity benefit generally refers to the return of all premiums paid by the insured. Some insurance companies may also provide a nominal bonus amount, which could be the interest accrued over the years, while others will deduct a processing fee before returning the premium amount. By choosing a term plan with maturity benefits, you ensure that your premiums are not ‘wasted’ in case you outlive the policy.

Convert the Policy

Your third and final option is to convert your term plan into a whole life insurance policy. Plan conversions are slightly complicated as compared to the other two options. Most insurance companies have limitations on which policies can get converted and which can’t. They may require you to undergo a medical exam or back-pay the premium difference to become eligible for whole life cover.

When individuals purchase a term policy, they should always opt for term plans with maturity benefits. Although the return of premium option cannot be used as a financial tool to build a corpus for the future, it does safeguard your finances. The premium amounts you pay over the policy tenure could amount to a decent sum. Even an individual who pays INR 6,000 per year for 30 years will get a return of premium amount upwards of INR 1,50,000. The amount can then be reinvested to help them in their golden years.

The main idea of a term plan is to provide life coverage when the policyholder needs it most. The policy offers financial security to their family members in case anything happens to them. If the policyholder survives the tenure, they can choose to renew their policy, convert it, or simply receive the maturity amount to enhance their finances.

ARN - ED/06/22/29566

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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