Are Maturity Benefits of all Life insurance policies Tax-free?
A maturity benefit is a benefit that comprises of an amount that the policy holder or the nominee of the insured receives when a life insurance policy matures. The life insurance policy should be active so that the maturity benefit can be availed. The maturity benefits include the basic sum assured amount, the terminal bonus if it is applicable and also an accrued guaranteed addition and vested simple revisionary bonus if any are there.
Only after the maturity of the policy, you will get the benefits of that insurance policy. Insurance companies have a set period of maturity tenure after which a definite sum is given to the policy holder or the nominees. You need to keep paying your premium to ensure the continuation of your life insurance policy so that when the time comes, you can receive the maturity benefits. Usually the maturity benefits comprise of the total premiums as well as the additional benefits that the insurance policy gives to the insured.
Now, if you choose a term plan under the life insurance policy, you will not be receiving any maturity benefits as a traditional term plan does not give out maturity benefits because it is a pure death benefit plan, meaning it will only provide the nominees or the family of the insured with the sum assured after the death of the assured and not when the tenure of the policy is over. So, if you want a maturity benefit for you and your family, choosing against a traditional term plan would be beneficial. In that case, a life insurance policy would be the best or a term plan which offers maturity benefits.
A life insurance policy will provide cover for you and your family. In case of your unfortunate death, the life insurance policy will provide protection to your nominees by giving them financial aid and support. Some companies also give an extra benefit in case the death occurred accidentally. Get life insurance policy and avail the maturity benefits.
How much maturity benefit do you get?
When the life insurance policy begins, the maturity benefit will remain equal to the total premiums paid and this will keep increasing each year. The maturity benefit sum will increase on a constant and same amount every time. The policy holder will get the bonus amount after the end of the policy term or tenure. The whole maturity benefit gets paid to the policy holder or the nominees of the insured at the end of the life insurance policy tenure.
Life Insurance maturity benefits, tax – free or not?
Under the Income Tax Act, 1961, the maturity benefits of a life insurance policy are up for tax benefits. There are certain tax deductions that are offered through section 80 C and section 10 D of the Income Tax Act. There are certain conditions to it though:
Under section 80 C –
- The premium paid for the maturity benefits must not be above the percentage of 10 % of the sum assured for the life insurance policies that were taken up on or after the date of 1st April of the year 2012. If the policy holder is suffering from any chronic diseases or is partially or totally disabled, then they are subject to a limit of 15 % so that they can be secure with higher premiums for their illness.
- The premiums paid for the maturity benefits shall not be above the percentage of 20 % of the sum assured for the life insurance policies that were issued between the dates of 1st April 2012 and 31st March 2012 if the maturity benefits are to be received.
Under Section 10 D –
This act allows the insured or the nominees of the policy holder to receive a tax – free sum assured as well as a tax free bonus in case of the maturity of the life insurance policy.
According to this section of the Income Tax Act, the maturity benefits will be non – taxable until the premium that is payable is lesser than 20 % of the sum assured of the year. So, the payable premium is what is taken into consideration and not the premium that is already paid. So, if you skip a premium and pay it with the next one, things can still work out as it will not add up to increase the premium.
The maturity benefits under the life insurance policy plan have a lot of great tax deductions which allow you to get a good return at the end of the life insurance policy term. Paying your premiums properly and ensuring that your life insurance policy is continued till the end of the tenure or the term so that you can avail all the benefits when the insurance plan term ends.