Maturity claim

What is a maturity claim?

A maturity claim is the settlement of the maturity benefit when a life insurance policy reaches the end of its term and the life assured is alive. Endowment, money back, guaranteed return and unit linked plans pay at maturity. Pure term plans usually do not, unless they carry a return of premium feature. The amount is set by the policy: a guaranteed sum, the sum assured plus vested and terminal bonuses in a participating plan, or the fund value in a ULIP.

Payments made during the term, such as money back instalments, are called survival benefits. They follow the same rules as maturity payouts.

How a maturity claim works in India

Unlike a death claim, a maturity claim is expected. The insurer knows the date years in advance, so the regulatory standard is strict.

Timeline. The Master Circular on Protection of Policyholders' Interests, 2024 says maturity benefits, survival benefits, annuity payouts and income benefits are to be paid on the due date. Insurers' citizens' charters also commit to sending policy payment information about one month before the due date. If the insurer pays late, the claimant is entitled to interest at the bank rate plus 2%, which the insurer must pay on its own.

Who is paid. The policyholder, or the assignee if the policy has been assigned. Section 39(11) of the Insurance Act, 1938 covers a common gap: if the policyholder dies after maturity but before the money is paid, the nominee is entitled to it.

What the insurer needs. Typically the policy details, a discharge or payout request in the insurer's format, the policyholder's KYC and a bank account. The 2024 policyholder regulations require refunds and claim payments to be made only by electronic transfer to the bank account of the policyholder, proposer or nominee, and require insurers to collect bank details at the proposal stage. In practice the most common delay is an old, closed or mismatched bank account.

Annuity and pension payouts. For annuities, the insurer will ask for periodic proof that the annuitant is alive. The 2024 master circular asks insurers to use technology such as biometric-enabled digital life certificates for this.

Disputed or unclear title. Where there are rival claims or insufficient proof of who is entitled, Section 47 of the Act allows the insurer to apply to pay the money into court, but not earlier than six months after the policy matured.

Unclaimed maturity amounts. If the insurer cannot reach the policyholder, the amount becomes unclaimed after 12 months and, after 10 years, is transferred to the Senior Citizens' Welfare Fund. It can still be claimed through the insurer for 25 years after that transfer. Policyholders can search for unclaimed amounts through Bima Bharosa.

Tax. Whether a maturity payout is taxable, and whether tax is deducted at source, depends on the policy's premium-to-sum-assured ratio, the premium level and the current Income-tax law. See Section 10(10D) and TDS on insurance payouts.

What maturity claims mean for distribution

Maturity is the one claim the distributor can plan for, and it is also the moment when a long relationship is either renewed or lost.

• Run a maturity calendar. Agents and bank relationship managers should know which customers mature in the next three to six months. A pre-maturity call to check the bank account, KYC and contact details prevents most delays.
• Set expectations on the amount. Customers often remember the illustration they saw at sale rather than the guaranteed figure. Explaining early what is guaranteed and what depended on bonus or fund performance avoids complaints when the cheque is smaller than hoped.
• Reinvestment is a fresh sale. Maturity money is often pitched into a new policy. That new sale needs its own needs analysis and suitability check under the 2024 rules on savings and annuity products. Rolling money into a product the customer does not need, to earn first year commission, is a classic mis-selling pattern.
• Annuity conversions need care. For pension plans that must buy an annuity at vesting, explain the annuity options, the payout frequency and the effect on any spouse before the customer signs.
• Unclaimed amounts are a service gap. A distributor whose customers show up in the unclaimed lists has lost touch with them. Periodic contact updates help the customer and protect the channel's reputation with the insurer.