What is a Survival Benefit in Life Insurance?

Life is unpredictable, and being financially prepared for unforeseen circumstances is crucial for responsible financial planning. Buying life insurance is vital in offering financial assistance to individuals and their families during the policyholder's demise. However, what happens if the policyholder survives the policy term? This is where survival benefit comes into play.

Survival benefit in life insurance ensures that the premium paid by policyholders will not be wasted. This article will delve into the details of survival benefits in life insurance, highlight their benefits, and provide guidance on choosing a policy that maximizes the benefits of this feature.

What is the Survival Benefit in Life Insurance?

Survival benefit or maturity benefit means that the policyholder will receive monetary benefits if he survives the policy term. Standard life insurance policies only offer a death benefit, ensuring financial security for beneficiaries after the policyholder's death. However, with changing needs and evolving insurance practices, survival benefits have emerged to address the concern of policyholders surviving the policy term.

Survival benefits in life insurance provide a lumpsum amount to the policyholder if they survive the policy term. This amount is pre-determined at the time of policy purchase. It is based on factors such as premium paid and policy-specific terms and conditions set by the insurance provider.

Importance of Survival Benefits in Life Insurance

Survival benefits offer comprehensive benefits to policyholders, making it an important feature to consider when choosing a life insurance policy. Following are the reasons why you should consider buying life insurance with survival benefits:

Achieving Life Goals: Survival benefits can serve as a valuable financial resource to meet various life goals. The payout received after the policy term can be used strategically to meet aspirations and provide a step towards a more prosperous future.
Regular Income: Survival benefits help in better financial planning. Policyholders can choose regular payouts of survival benefits in a stable income stream, providing stability and facilitating effective budgeting and financial management.
Retirement Income: Survival benefits can be beneficial in retirement planning. The payments received can become a reliable source of retirement income to supplement other sources such as pensions or investments. This contributes to making life after retirement more comfortable and financially secure.
Savings and Life Cover: Survival benefits make the policy more beneficial as policyholders get insurance coverage and can also save for the future. These accumulated savings provide financial support and a safety net during unexpected circumstances.

Factors To Considеr Whеn Opting For Life Insurance with Survival Benefit

Policyholders need to consider several factors while buying a life insurance policy with survival benefits to make an informed decision:

Policy Tеrm: Always check the policy term before buying any life insurance policy to know when your survival benefits will be paid. Choosе a policy tеrm as per your financial goals you want to achiеvе.
Payout Intеrvals: Assess the available payout options for survival benefits and determine which option best suits your financial requirements. Consider factors such as immediate financial needs, long-term financial planning, and income sustainability when selecting the payout method.
Add-on Riders: Explore different add-on riders the policy offers. Riders, such as critical illness coverage or disability benefits, can enhance the overall value and protection the policy provides.
Financial Stability of the Insurance Provider: Always check the financial stability and reputation of the life insurance company before buying a policy. Look for established insurers with a strong track record in honouring claims and providing reliable customer service.

Payout Options for Survival Benefits

Life insurance policies with survival benefits typically offer multiple payout options, including:

Lump Sum Payment: This option allows the policyholder to receive the entire survival benefit as a lump sum. It provides immediate access to significant money, which can be used for various purposes such as loan repayment, major expenses, investments or estate planning.
Regular Income Payments: Policyholders can choose to receive survival benefits through regular income payments over a specific period. This option provides a steady flow of income, which can supplement retirement funds, cover ongoing expenses, or ensure financial stability in the long term.
Combination of Lump Sum and Income Payments: Some policies offer a combination of both lump sum and income payments. This allows policyholders to receive a portion of the survival benefit as a lump sum while the remaining amount is distributed as regular income payments over a predetermined period.

Conclusion

Survival benefits in life insurance have changed how individuals perceive life insurance policies. They provide policyholders with additional financial protection and peace of mind. By offering payments to individuals whose life insurance policy term has been completed, survival benefits ensure that the premium paid does not go to waste. When you consider life insurance options, carefully evaluate the benefits of survival benefits, explore available payment options and consider your personal financial goals and needs.

Survival Benefit in Life Insurance FAQs

What is a survival benefit in life insurance?

Ans. A survival benefit in life insurance is the amount that life insurance companies pay to the policyholders if they survive the policy tenure.

Which types of life insurance policies offer survival benefits?

Ans. Survival benefits are offered in whole-life insurance, endowment plans, and money-back policies. They are not typically available in term life insurance policies.

When is the survival benefit paid out?

Ans. The survival benefit is typically paid out at the end of the policy term if the policyholder is still alive. Some policies may offer the option to receive the benefit in lumpsum or as an income stream over a specified period.

Are there any tax implications for receiving a survival benefit?

Ans. The tax implications of receiving a survival benefit can vary depending on your country and the specific type of policy. The payout may be tax-free in some cases, while it may be subject to income tax in others. It is recommended to consult with a tax advisor to understand the specific tax implications of your situation.