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Maturity Amount and Sum Assured: Understand How They Differ From Each Other

B
Bajaj Finserv Health
October 4th, 2021
6 mins read

Key Takeaways

  • Maturity amount includes the sum assured along with bonuses
  • MV=P*(1+r) n is the maturity value formula for manual calculations
  • Sum assured is the fixed amount paid to nominees in the event of death

Investing in a life insurance policy is one of the most trustworthy methods to provide financial security to your family members. While life insurance has a huge market share of 75% in the insurance industry, only 18% of the population living in urban India is insured as per PWC. 

Further, in the financial year 2021, just 15% of deaths due to COVID-19 were insured [1].

The pandemic has taught us all that thinking proactively about health, life and the future is crucial, and this applies to life insurance too. In 2019, India only enjoyed a share of 2.73% in the worldwide life insurance market [2]. This reveals that the large gap that the country, as one of the most populous in the world, has to bridge. As more and more people understand its important and sign up for life insurance, this is sure to change.

However, it is essential to understand what maturity amount is and how it is different from the sum assured in a life insurance policy. These details can make all the difference when you invest in one. Read on to learn about the maturity value and the difference between sum assured and maturity amount.

Additional read: Importance of Health Insurance: 4 Reasons to Have Health Insurance in India

What is the maturity amount in a life insurance policy?

Maturity amount is the value or sum paid by your insurance provider after your policy matures or when its term ends. While sum assured is the guaranteed amount paid to the policyholder without including any bonus amount, maturity amount includes additional bonuses as well. In simple words, sum assured in a life insurance policy pertains to the total coverage amount of the insurance policy.

Maturity amount includes the sum assured along with bonus amounts. It is the lump sum amount you get after the maturity of your policy. For instance, if you have taken a life insurance policy for 15 years, you get a payout after the completion of 15 years. For availing maturity benefits, ensure that you pay your premiums regularly and have completed your policy term as well. Buying a policy with maturity benefits also provides an additional option of death risk cover. If you face untimely death, then your family is eligible to get the payout.

what is maturity amount

How to find maturity value using the maturity value formula?

You can find the maturity value using a simple formula for calculation. The maturity value formula is MV=P*(1+r) n

  • Here, MV denotes maturity value and P stands for the principal amount. 
  • While r is the applicable rate of interest, n indicates the number of compounding years from the start date of the policy till your policy matures. 
  • The principal amount is the total coverage for which you have availed the life insurance policy. 
  • The number of years refers to the term of your policy. 
  • The rate of interest is what you earn during a particular time period.

Today, technology has made our lives easier, and you don’t have to calculate your maturity value manually. Use an online maturity calculator and simply click to know the maturity benefit eligible for your policy. All you need to do is enter the sum assured amount of your policy and other essential information like name, age and date when policy was taken. This helps you compute the maturity amount in no time!

sum assured vs maturity amount

What is the difference between sum assured and maturity benefit?

As mentioned, the sum assured is the total value of a life cover that is computed on the basis of your economic value. It is a fixed value paid by the insurance company to your family in the event of your death.

There are different types of maturity insurance policies like endowment plans, unit linked insurance plans or TROP plans that can offer umpteen maturity benefits. One advantage is that life insurance policy with maturity benefits come with flexibility. This means that you can select the policy term, coverage value and payment modes convenient for you.

Opting for such policies helps your family sail through unexpected financial crisis with ease. Moreover, the accumulated amount you get after policy matures can be used for your child’s marriage or education. Not only do you get sum assured but you also get bonuses earned.

While maturity sum is culmination of total premiums paid until the time policy matures, sum assured is a pre-fixed amount paid to the nominee of the policyholder after death. It is a guaranteed amount you get upon paying regular premiums. If you increase sum assured amount, your life insurance policy premium will also increase. So, it is essential to choose a sum assured for which you are able to pay regular premiums.

Additional read: 7 Important Health Insurance Parameters to Select the Right Plan for Yourself

Taking life insurance coverage provides a safety net for your family in case of any unexpected event. Apart from tackling an unexpected financial crisis, investing in an insurance plan can also help you fulfill your long-awaited dreams with the help of the maturity amount. Buy a life insurance plan online for a secure future and save the hassle of branch visits.

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