What Happens When Life Insurance Reaches Maturity?

Life Insurance plans are designed to provide financial cushioning to the loved ones and family members of the insured for a specified period known as ‘term’. While purchasing life insurance in UAE you must have noticed that there is a maturity date mentioned on the policy documents. The maturity of life insurance policies is one of the most misunderstood aspects and often leads to confusion and ambiguity.

To explain it simply, the maturity of a life insurance policy can be referred to as the period after which the policy benefits are not active and the coverage ceases to cover the applicant. The maturity criteria and benefits are provider-specific and vary from one provider to another.

In case of whole life insurance policies, there is no maturity constraint because these plans are meant to cover for the entire life. Therefore, in order to understand the maturity benefits and criteria of life insurance, it is important for us to understand the products first.

In this thread, we will take a close look at what happens when a life insurance policy matures along with the pros and cons of having such a policy.

Term Life Insurance vs. Whole Life Insurance

Before we go ahead and dive deep into the gradations of life insurance maturity it is important to understand the differences between term insurance and whole life insurance policies.

Term life insurance is the most basic and affordable form of insurance that provides coverage for a pre-defined period known as ‘term’ of the policy. Policyholder can choose the term of the plan and based on it the premium is calculated. Term life insurance is a risk mitigation tool that covers the degree of risk associated with one’s life and comes with zero maturity benefit.

This means that if the policyholder surpasses the policy period without filing the claim there is no return obtained on the premium. The policy can be renewed for future so as to continue coverage offered by the provider against the premium.

Whole life insurance is a completely different from of term insurance because these plans offer coverage for the entire life of the policyholder with a guaranteed payout. Regardless, of the age of the applicant, the coverage continues which is one of the reasons behind the high cost of these plans.

Moreover, some whole life insurance policies come with an additional cash component that acts as a maturity benefit. Technically, a whole life insurance policy provides matures when the policyholder passes away and the death benefit and maturity benefits are provided to the nominees of the plan.

What happens when Term Life Insurance Policies Mature?

As mentioned earlier, term life insurance policies provide coverage for a specific period and expire after that particular period known as the term. If you’ve opted for a term life insurance policy and you survive the policy period then in that case there will be no payout from the provider’s end as these are risk mitigation insurance products that come with no maturity benefits. In order to make sure that your premiums are not wasted you can apply for renewal of the policy.

However, if the policyholder passes within the policy period the claim can be filed and after processing the death benefit will be paid to the nominees of the policy. The expiration of the term insurance will exactly be the same in both ways.

What Happens when Whole Life Insurance Policy Matures?

Unlike term life insurance policies, whole life insurance plans provide coverage to the nominees for the entire lifetime. In addition to the basic coverage whole life insurance in UAE comes with a cash components that can be referred to as the maturity benefit of the policy.

After the demise of the policyholder, the policy is matured and provides the death benefit along with the maturity benefit to the policyholder’s family i.e. the nominee of the plan. The cash value component of the whole life insurance policy will be paid to the nominee of the plan based on the option chosen at the time of underwriting.

In most cases, if the policyholder opts for the maturity benefit it is paid in the form of a lump sum that is less than the actual death benefit.                     

In a Nutshell

Life insurance in UAE is an absolute must to safeguard and protect the future of your loved ones against unforeseen events on the trail of life. The choice of the insurance product you are opting for should be based on your insurance needs and budget.

Always remember insurance needs are dynamic and change from time to time hence it is crucial to carefully analyze, compare, shortlist and then choose the final product. With several advantages coupled with zero additional charges, a life insurance maturity is a good-to-go option if you are opting for the whole life insurance policies. With this, you can build a strong financial backup and safeguard yourself and your family.