Many traditional insurance policies are for a fixed period. Upon reaching the end of this period the policy is said to have matured. Your insurance coverage expires at this point. Depending upon the type of policy you have, you might be eligible for some maturity proceeds. Here we share with you some important things you must know if your policy has matured or is about to mature.
When your policy is about to mature, the insurance company will let you know in advance. This is usually done by sending you a notice in the form of a letter mailed to the address you have given. Different insurance companies have different procedures, but most will inform you one or two months before the maturity date.
If you are not sure when your policy will mature check with your insurer or log on to their website with your policy number to check your policy status.
The insurance company will send you a discharge form or claim form that you need to sign and send back. You will also need to send your original policy documents for this. Make sure you keep a photocopy of the original in case it gets lost in the mail while you are sending it back to the company.
The insurance company will then send you a post-dated cheque through physical mail so that it can reach you before the due date. Some companies also follow the rule than when the amount due is less than Rs 60,000, they will send you the cheques directly without the need of a discharge form. Today, it has also become possible to receive the maturity proceeds through electronic payment methods such as electronic clearing system (ECS), national electronic fund transfer (NEFT) system, as approved by the Reserve Bank of India.
At the time of getting the policy you would have declared a nominee on your insurance application. This is a person to whom the insurance proceeds are paid out to if you are not around.
In case of your death within the policy term, your nominee is required to make a claim on the policy. He/she will need to send in relevant documents such as your death certificate, ID proof of the nominee, statement from the nominee giving his/her details as well as the insured person's. If the death was accidental, then an FIR or a post-mortem report is also required.
Once the necessary paperwork is done and the insurer is convinced that the claim in not fraudulent, then the insurance company will pay out the claim.
Globally, the insurance industry is full of incidents of fraud. As a result, insurers are very cautious if there is even a hint of doubt in their mind about the circumstances or events leading up to your death.
If the death of the insured is unnatural, as in the insured has committed suicide within the 1st year of the policy, or if the police investigation report is not cleared, the insurer can refuse to pay the claim.
Additionally, if the insurance company finds out that you had lied in your original insurance application or withheld or distorted materially relevant facts, then depending upon the nature of the information withheld or misstated the company can either totally refuse to pay the claim or consider a deduction in the claim amount. For instance, if you are a smoker and suffer from heart disease, but you have not disclosed this to the company, then at the time of filing for a claim if the company gets to know that these facts were withheld at the time of application, the insurer might refuse to pay out the claim.
Under current tax laws, the amount you or your dependants receive on the maturity of your insurance policy exempted from tax under section 10(10)D of the tax code.
However, please keep in mind that there are indications that the Direct Tax Code might affect the taxation of insurance proceeds once the regulations come into place. For the time being, as of August 2010, the proceeds are tax-free.
Once the policy matures, you are free to do whatever you want with the proceeds.
You can either use it immediately to fulfill a specific requirement, such as say paying for your daughter's wedding or for her education abroad. Or, you can buy an asset for investment purposes.
Whatever you choose to do, do ensure that you are still adequately insured and that even after the maturity of one of your policies, you still have enough insurance coverage to take care of yourself and your financial dependants in case something were to happen to you.
Many insurance companies sell pension plans that can help fulfill retirement funding needs. On your chosen retirement (vesting) date, you will get a lump sum amount as the proceeds from this policy. This usually comprises the sum assured under the plan plus any attaching bonus or fund value in case of unit linked pension plan.