Survival Benefit

## What it is A survival benefit is a payout you receive while you are still alive, paid at pre-defined intervals (milestones) during the term of certain life-insurance policies — most commonly money-back plans, and some endowment and child plans. Instead of all the money being paid only on death or maturity, the insurer returns chunks of the sum assured at fixed points along the way, *provided the policyholder survives* to each milestone.

## How it works In a typical money-back policy, the sum assured is paid out in stages. For example, a 20-year plan might pay 20% of the sum assured at the end of years 5, 10 and 15 as survival benefits, with the remaining 40% plus accrued bonuses paid at maturity (year 20). If the policyholder dies during the term, the full sum assured (often the entire amount, regardless of survival benefits already paid) plus bonuses goes to the nominee — the death benefit isn't reduced by survival payouts already made, in most plans.

This built-in liquidity is the selling point: you get periodic cash for goals (a child's school fees, a planned expense) while keeping life cover running.

## The Indian context and the catch Money-back and endowment plans with survival benefits are heavily sold in India by LIC and other insurers, often pitched as "safe" products that "return your money." But investors should look hard at the returns:

- The IRR (effective return) of traditional money-back/endowment plans is typically low — often 4–6%, well below equity and even some debt options, because a chunk of premium funds the insurance and costs. - Survival-benefit and maturity proceeds are tax-exempt under Section 10(10D) *only if* the policy meets premium-to-sum-assured conditions (premium not exceeding 10% of sum assured, and the ₹5 lakh aggregate annual premium cap introduced in 2023 for non-ULIP policies).

## The better way to think about it Financial planners generally advise separating insurance from investment: buy a pure term plan for high cover at low cost, and invest the difference in mutual funds/PPF/NPS for far better returns and liquidity, rather than relying on low-yield survival benefits.

Bottom line: a survival benefit gives comforting periodic payouts and tax-friendly cash flow, but as an *investment* it usually underperforms — treat money-back plans as low-return savings with insurance attached, not as a growth vehicle.