Term life insurance policy offers death benefits to the beneficiary of the policyholder upon their unfortunate demise during the policy term. It does not have any cash value or maturity benefits. However, there are a few ways to get the cash value from a term life insurance policy.Read more
*Tax benefit is subject to changes in tax laws. *Standard T&C Apply
** Discount is offered by the insurance company as approved by IRDAI for the product under File & Use guidelines
Once the policy matures, you get all the premiums you paid without any interest as the maturity benefit. This is called the Return of Premium feature in term life insurance. It is not a common feature but can be enjoyed by those policyholders who opt for it.
Several policies offer cash value while the policyholder is still alive, such as permanent life insurance or universal life insurance policy. The other benefits provided by term life insurance are as follows:
If you get a permanent cover insurance policy, you are eligible for the cash value on your life term insurance policy. Cash value is the amount you receive during your insurance tenure that you can withdraw or use to pay premiums. You can use cash value without jeopardizing your insurance coverage. However, most term insurance policies don't give cash value on the term life insurance.
You may not get direct cash value from your term insurance policy, yet there are multiple ways you can use your term life insurance policy to yield finance for you.
Listed below are the ways to gain money from your policy:
Once you surrender your policy, you get all the money you have paid as a premium. You also get the interest you have earned on the payments you made on it. However, you must understand that you may get monetary returns in this way, but you will lose your coverage.
Partial Policy Surrender or timely withdrawals you make from your insurance policy impact your returns. Many insurance companies allow policyholders to withdraw money from the policy on a timely basis for reasons such as educational expenses and down payments. However, when you make frequent withdrawals like these, it significantly reduces death benefits and policy returns.
Many banks or Non-Banking Financial Companies (NBFCs) allow a term life insurance policy as collateral for the loan. If the loan is unpaid at the time of the policyholder's death, all unpaid amounts will be deducted from the death benefit. Taking a loan against an insurance policy can also impact policyholders' CIBIL score negatively, which can lessen the chances of getting a loan sanctioned in the future.
If you want to make a settlement and you are low on funds, you can sell your insurance policy to any individual as a payment. Selling an insurance policy is a simple process. However, you will be devoid of insurance coverage. The person buying your policy can surrender or keep it by paying all the outstanding premiums. After repurchasing the policy, the new policyholder will be eligible for all the benefits of the policy.
If you do not want to keep your property like a mortgage or collateral with your bank or NBFC for taking loans, your term insurance policy will be the best financial instrument at your disposal. Most banks accept one or more insurance policies as the collateral on the home loan.
You must remember that the policyholder should also be the co-owner and primary applicant on a home loan. In case of the policyholder's death, the insurance policy's death benefit will be reduced to repay the home loan.
Purchasing a term life insurance plan always benefits the policyholder in more than one way. In your absence, it will provide for your family. Though it lacks the feature of providing cash value like any other permanent life insurance policy, it can still benefit you.
If you have a term insurance policy and feel the need for cash, you can always turn to the methods mentioned in the article to meet your requirements.
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