Survival Benefits in Life Insurance

Survival benefits are additional benefits offered by a life insurance company if a policyholder survives the policy term. As the name suggests, survival benefit is only given out if you ‘survive’ for a specific period. In case, the policy holder does not survive, the death benefit is paid out to the beneficiaries of the policyholder.

What Plans Offer Survival Benefits?

Survival benefits are generally included in savings plans, whole life insurance plans, and ULIPs. Of course, the nature/type of your survival benefits will vary depending on the terms and conditions of your policy. To put it simply, the premium you pay to the insurer is allowed to grow, and that growth is then returned to you after a certain duration (if your policy is still active). The amount you receive as survival benefits will depend on your insurance policy, the premium you pay, as well as your sum assured. Think of survival benefits as a return on your investments!

How Survival Benefits Help You Reach Your Goals?

Most savings insurance plans provide you with a detailed breakdown of the returns you will receive after a certain period of time. Meaning that you can plan well in advance to use your survival benefits to their fullest potential.

For example, imagine a scenario where you know that you will receive a lumpsum amount from your insurer after 10 years. Knowing this fact, you can comfortably plan for a long family vacation or pay for your new house’s downpayment. Assured survival benefits can help you financially plan for the future and turn your dreams into reality!  

However, if your insurance plan is a participating plan (where you personally make investments) or a ULIP, then the value of your survival benefits might be unpredictable. In ULIPs, the value of your survival benefits generally depends on how well your market linked funds are performing.

Are Survival Benefits and Maturity Benefits the Same Thing?

One important fact to remember is that survival benefits are not the same as maturity benefits. While both survival and maturity benefits are provided only if you are still alive, the difference lies in when the returns are given out. Maturity benefits are only provided at the end of your policy, meaning that you are no longer covered by the life insurance plan once you receive your maturity benefit. On the other hand, survival benefits are given out periodically while the policy is still active.

Consider survival benefit as a reward for reaching certain milestones during your term, while maturity benefit is the final lumpsum you get for continuing with the plan until the very end of the policy term.

Types of Survival Benefits in Insurance

Different insurance plans have different ways of paying out your survival benefits. Below are some of the most common types of survival benefits that you can expect from insurance plans offered in India.

• Lumpsum Payments- Some plans offer lumpsum payouts at various intervals. For example, an insurer might offer to pay you 25% of your returns on the 7th, 14th, and 21st year of your policy, with the last 25% of your returns being paid out at maturity. Keep in mind that this is just an example, and different insurers have different breakdowns for their money-back/savings plans.
• Income Benefit Payouts- If you would rather increase your overall income than get a lumpsum amount, then choose a plan with income benefits. Income benefit plans offer regular payouts once your premium paying term is concluded. You might even get to choose between monthly, quarterly, half-yearly, or yearly income payouts.
• Annuity- Retirement plans or annuity plans give out income at predetermined intervals. The difference here is that you can choose to immediately receive income if you plan to retire soon.   
• Survival Benefits Triggered by Riders- Some survival benefits are only received if your insurance plan included riders. For example, a critical illness rider may offer you and your family additional survival benefits if you get diagnosed with a serious disease or health condition. Or a permanent disability rider might help you safeguard your finances in case of a crippling accident. To get survival benefits from riders, your plan must not only include the specific riders, but you must also trigger said riders by meeting certain conditions.

Are Survival Benefits Tax Deductible?

According to Section 10(10D) of the Income Tax Act, survival benefits can be tax deductible only if the value of the returns is not more than 10% of the total sum assured. If your survival benefits are more than 10% of the sum assured value, then you will be required to pay tax according to prevailing tax law. Also, keep in mind that tax laws in India keep changing, so this current law may also be repealed or amended in the future.

Choose a Plan That Meets Your Needs!

In conclusion, the main perk of survival benefits is that you can plan for future financial goals well in advance. Of course, you must also choose a plan that offers survival benefits that suit your needs. Edelweiss Tokio Life- Guaranteed Income STAR is a great plan to start your savings journey. This plan even provides the flexibility to choose how you want your survival benefits, allowing you to prepare for the future the way you like!  

Aastha Mestry - Portfolio Manager          

An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.