When it comes to life insurance, understanding the terminology can be overwhelming. Among the many terms you may encounter, survival benefits and maturity benefits are two key concepts that often cause confusion. While both are payouts made by insurers, they serve different purposes and cater to different needs. In this blog, we’ll delve into the differences between Survival Benefits vs Maturity Benefits, helping you make informed decisions about your life insurance policies.
What are Maturity Benefits?
Maturity benefits refer to the lump sum amount paid to the policyholder when the policy term ends, provided the policyholder survives the term. These benefits act as a reward for maintaining the policy throughout its duration and are designed to help achieve long-term financial goals.
Key Features of Maturity Benefits:
- Eligibility: Maturity benefits are payable only if the policyholder survives the policy term.
- Components: Often include the sum assured along with bonuses, if applicable.
- Purpose: Meant to provide financial security, fund future goals, or act as a savings tool.
- Policy Types: Commonly offered with endowment plans, money-back plans, and ULIPs (Unit-Linked Insurance Plans).
Example: If Ravi opts for an endowment plan with a sum assured of ₹20 lakh for a term of 20 years, he will receive the maturity benefit of ₹20 lakh (plus any bonuses) if he survives till the end of the term.
What are Survival Benefits?
Survival benefits refer to the payouts made to the policyholder at specific intervals during the policy term, provided the policyholder is alive. These periodic payments are a percentage of the sum assured and are designed to offer liquidity and financial assistance during the policy term.
Key Features of Survival Benefits:
- Eligibility: Payable only if the policyholder is alive at the scheduled intervals.
- Purpose: Provides regular income to meet short-term financial needs.
- Policy Types: Typically associated with money-back plans.
- Components: A fixed percentage of the sum assured is paid at predetermined intervals, and the remaining sum assured is paid at maturity (if applicable).
Example: If Priya opts for a money-back plan with a sum assured of ₹10 lakh and a term of 20 years, she may receive 20% of the sum assured every 5 years (i.e., ₹2 lakh at each interval). The remaining 40% of the sum assured, along with bonuses, will be paid as maturity benefit at the end of the policy term.
What Kind of Life Insurance Plans Offer Survival Benefits?
Survival benefits are primarily offered under specific life insurance plans designed to provide periodic payouts. These include:
- Money-Back Plans:
- These plans are structured to provide regular payouts as survival benefits during the policy term.
- The remaining sum assured, along with any applicable bonuses, is paid as a maturity benefit.
- Ideal for individuals seeking liquidity for short-term goals like education or household expenses.
- Child Insurance Plans:
- Often structured to provide survival benefits aligned with key milestones in a child’s life, such as education or marriage.
- Ensures financial support for a child’s future needs while offering life insurance coverage.
- Group Insurance Plans with Survival Options:
- Certain group insurance plans include provisions for survival benefits as periodic payouts, depending on the policy’s terms.
These plans are well-suited for individuals looking for both insurance coverage and periodic financial support during the policy term.
Survival Benefits vs Maturity Benefits: Differences
| Aspect | Survival Benefit | Maturity Benefit |
| Definition | Periodic payouts made to the policyholder during the policy term. | Lump sum payout made to the policyholder at the end of the policy term. |
| Eligibility | Payable only if the policyholder is alive at the scheduled intervals. | Payable only if the policyholder survives the entire policy term. |
| Purpose | Provides liquidity to meet short-term financial needs during the policy term. | Acts as a reward for completing the policy term and achieving long-term goals. |
| Policy Types | Commonly offered in money-back and child insurance plans. | Commonly offered in endowment plans, ULIPs, and some money-back plans. |
| Payout Structure | Periodic payouts as a percentage of the sum assured. | One-time lump sum payout, often including bonuses. |
| Remaining Benefits | Remaining sum assured (if any) is paid at maturity. | No further benefits after the maturity payout. |
What are the Advantages of Survival Benefits?
- Regular Income:
- Provides periodic payouts during the policy term, ensuring liquidity to meet immediate financial needs.
- Goal-Based Planning:
- Ideal for funding short-term goals such as children’s education, household expenses, or loan repayments.
- Financial Flexibility:
- Offers flexibility to manage finances during the policy term without waiting for the policy to mature.
- Dual Benefits:
- Combines the benefits of periodic payouts and life insurance coverage, ensuring comprehensive financial security.
- Motivation to Save:
- Encourages disciplined savings by offering rewards in the form of survival benefits at regular intervals.
- Child-Centric Financial Support:
- Tailored to align with key milestones in a child’s life, ensuring that their aspirations are not hindered by financial constraints.
Survival benefits are an excellent choice for individuals seeking both life coverage and periodic financial assistance during the policy term.
Conclusion
Understanding the difference between Survival Benefits vs Maturity Benefits can help you choose the right life insurance plan based on your financial goals. While maturity benefits reward you at the end of the policy term, survival benefits provide periodic payouts to address immediate needs. Assess your requirements carefully to determine which benefit aligns with your life stage and aspirations.
FAQs
What is the main difference between Survival Benefits vs Maturity Benefits?
Survival benefits are periodic payouts made during the policy term, while maturity benefits are a one-time payout given at the end of the policy term. Survival benefits cater to short-term financial needs, whereas maturity benefits are geared toward long-term financial planning.
Can a policy have both survival and maturity benefits?
Yes, certain policies, like money-back plans, offer both survival and maturity benefits. Policyholders receive periodic payouts during the term and a lump sum (remaining sum assured) at the end of the term.
Are survival benefits taxable in India?
Survival benefits are usually tax-free under Section 10(10D) of the Income Tax Act, provided the premiums do not exceed 10% of the sum assured. However, it is advisable to consult a tax expert for specific scenarios.
Which life insurance policies provide survival benefits?
Survival benefits are typically provided under money-back plans, child insurance plans, and some group insurance policies. These plans are designed to offer liquidity during the policy term.
Can survival benefits be customised based on my financial goals?
Yes, many insurers allow customisation of survival benefit payouts. You can choose plans that align with your financial milestones, such as child’s education or loan repayment.
What happens if I don’t survive to receive the maturity benefits?
If the policyholder does not survive the term, the nominee receives the death benefit, which is usually the sum assured, ensuring financial security for the family.
Are there any penalties for withdrawing survival benefits?
No, survival benefits are scheduled payouts and not considered withdrawals. Policyholders receive these as per the policy terms without penalties.
How do I decide between a policy offering survival benefits and one with only maturity benefits?
Choose based on your financial needs:
- Opt for survival benefits if you need periodic income during the policy term.
- Choose maturity benefits if your focus is on building a lump sum for long-term goals.
Do survival benefits reduce the final maturity benefit?
Yes, in plans like money-back policies, the survival benefits paid during the term are subtracted from the total sum assured, and the remaining amount is paid as the maturity benefit.
Are there any riders that enhance survival or maturity benefits?
Yes, riders such as critical illness or accidental death can be added to enhance the coverage and benefits of the policy, ensuring comprehensive financial protection.
