Many people in Malaysia buy insurance not just for protection but also as a way to build up savings over time. That’s where a savings-based insurance policy comes in, combining life coverage with the opportunity to grow your money. But how exactly does the maturity benefit work in this type of plan, and why does it matter for your long-term financial goals?
What Is a Savings-Based Insurance Policy?
A savings-based insurance policy (sometimes called an endowment plan) is designed to provide life insurance protection while helping you accumulate a lump sum over a set period. You pay regular premiums, typically monthly or annually, for a fixed term, such as 10, 15, or 20 years.
If something happens to you during this term, your beneficiaries receive the sum assured. If you outlive the policy term, you receive the maturity benefit.
What Is the Maturity Benefit?
The maturity benefit is the lump sum payout you get when your savings-based insurance policy reaches the end of its agreed term, provided you’ve kept up with your premium payments and haven’t surrendered the plan early.
This payout typically includes:
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The sum assured — the guaranteed amount promised by the insurer.
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Any bonuses or dividends declared by the insurer, if your policy is a participating plan.
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Sometimes a final terminal bonus, depending on the insurer’s performance and the type of plan.
For example, if you bought a 20-year policy and paid your premiums faithfully, you’ll get your maturity benefit when the plan matures in the 20th year.
How Can You Use the Maturity Benefit?
Many people use this lump sum as part of their financial planning to:
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Pay for their child’s education.
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Supplement their retirement savings.
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Settle large expenses, such as paying off a loan.
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Invest further or start a small business.
Because the maturity benefit is planned, it can be a useful way to achieve long-term goals with discipline.
How Is It Different from Regular Life Insurance?
Unlike pure life insurance, which only pays out if something happens to you, savings-based plans give you both protection and a cash benefit if you outlive the policy term.
However, it’s important to know that:
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The returns are typically moderate compared to high-risk investments, such as stocks.
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You should commit for the full term to enjoy the full benefit.
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Early withdrawals or surrendering the policy can reduce your payout or even result in a loss of money.
Things to Consider Before Getting One
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Premium Commitment
Can you commit to paying the premiums for the entire term? Missing payments can affect your returns or even void the policy. -
Returns vs. Other Savings Options
Savings-based insurance policies offer disciplined savings but may deliver lower returns than other investments. Consider them as part of a balanced portfolio. -
Read the Fine Print
Understand the sum assured, bonuses, surrender value, and any conditions that could affect your maturity payout.
Final Thoughts
A savings-based insurance policy can be a practical way to combine protection with disciplined long-term saving, especially if you struggle to save on your own. The maturity benefit gives you a clear goal: a lump sum at the end of the policy term that you can use for important milestones in life.
If you’re considering an insurance plan with savings, compare different providers, understand the terms, and ensure it aligns with your financial goals. A good plan can help you protect what matters today while saving for tomorrow.
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