How Is Guaranteed Maturity Benefit Calculated?

Written by : Knowledge Centre Team

2021-04-08

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Life insurance policies ensure the security and well-being of the family of the policyholder, in the unfortunate event of his death. A life insurance policy with maturity benefits adds a lot more to the investment than just the recovery amount. A person must be aware of the best life insurance plan that can be availed in the market.

Although there might be a lot of policies being offered at a cheap rate, the individual must assess the best life insurance plan, which will ensure returns from the policy. Nowadays, many people are opting for an endowment policy to get life insurance benefits rather than just a simple life insurance cover.

Having a life insurance policy with maturity benefits has a two-faced advantage. A policyholder through the term insurance plan is insured a guaranteed amount, but in the case of survival of the policyholder gets different benefits on the maturity of the policy, which are more than what was initially guaranteed.

What are the maturity benefits?

The claim of the policyholder on the maturity of the policy is categorized as maturity benefits. The only requirement to claim the maturity amount is to continue with the policy until the term of the contract is completed. On completion of the term, the insurance company provides the policyholder with the guaranteed benefits of a life insurance policy along with the maturity sum, which is the multiple of the premiums paid up to that time.

What are the actual benefits?

The guaranteed life insurance benefits gradually add up to the total premium paid by the policyholder. The policyholder gets back the premium paid up to the time of completion of the maturity period, but at the same time, he also gets additional benefits. These additional benefits are already conveyed to the policyholder by the insurance company through its terms and conditions. It is the bonus which the policyholder gets at the end, and the composition of the bonus only gets bigger and bigger.

How to calculate maturity benefits on your life insurance?

People opting for life insurance policies with maturity benefits often find it cumbersome to predict the outcome of their investment. Banks provide a straightforward policy for their accounts and other transactions. However, the benefits of a term insurance plan can sometimes be difficult to fathom. Let’s go through the steps of calculating the maturity benefits available with any insurance plan.

Read the terms and condition thoroughly

You must be through with the terms and conditions under which the insurance company is proving the maturity benefits. Once you have gone through the T&C, make a table like the one given below.

Year

Premium

Charges

Final Amount

Interest/Bonus

Balance

Premium is the amount paid by the policyholder to the insurance company. The charges are deducted by the insurance company or by the bank, or the Government as the case may be. After deducting the charges, the amount of money remaining is the final amount on which the interest is charged, and the balance is the amount credited to the account at the end of every year.

Calculate your maturity benefits

Charges do not remain the same throughout. They differ from year to year and from company to company. Where some companies change their rate of interest and premium every year, some provide more stability with their charges. All the charges must be subtracted from the amount from the premium to determine the final amount. All the interests and bonuses received are to be added, but the base amount must be determined first.

Repeat the calculations

The calculations must be repeated year after year until the maturity date arrives. But the years must be carefully added to the final amount.

Year	Premium	Charges	Final Amount	Interest/Bonus	Balance
1.	P1	X	P1-x	y	(P1-x)+y=B
2.	P2	x2	(P2-x2)+B	y2	(P2-x2)+B+y2=C

If policy matures in ten years, then the value of the balance column when the year column shows ten will be their maturity benefits. To calculate your net returns subtract all the premiums paid from the amount of maturity benefit.

Variable additions

Sometimes there may be some variable additions to the amount. Unlike the interest and the bonuses, which are assured payments, these variable amounts cannot be predicted, and their payment is unsure. Therefore, these variables should not be considered while calculating the final maturity amount. Only the guaranteed amongst must be considered while planning the long-term investment.

When do you get the maturity benefits if you have a life insurance policy?

Maturity claim arises only on the completion of the life insurance policy. When a policy completes its full tenure, the amount settled towards the life assured is the maturity benefit of that policy. Different insurance companies have different terms and conditions which have to be followed if the maturity amount is to be claimed.

The only prerequisite which must be followed is that the term of the policy must be completed and all the premiums should be duly paid, and the policy must have been continued in its due course without any interference.

To claim the maturity benefit, the policyholder must fill up a policy discharge form. The money can also be paid before the maturity date if the policy form is paid well before the date of maturity of the policy. Normally, the insurance companies settle the claim well in advance of the date of maturity.

People opt for a life insurance policy to ensure that even after their demise, their family and their needs are looked after. A life insurance policy with maturity benefits offers the same security that comes with a normal term insurance plan, but it also adds the option of additional returns in case the policy matures. It offers a double investment to the policyholder. Keeping this in mind, many people invest in both the provident fund for long-term benefits and in term investment plans where the rate of premium is low.

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