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Life after 50 is certainly a golden period. As you approach retirement, you must be done with your family's long term financial commitments, such as a child's education, marriage etc.
However, it is not the end of responsibilities! You may have your elderly parents and spouse being your dependents after your retirement. It becomes your responsibility to give them a good standard of living at different stages in life. Also, in life after retirement, you can feel free to accomplish your personal financial goals such as a long-awaited vacation, starting a hobby, setting up a small scale business, etc.
How do you accomplish such a desire and protect your dependents at the same time? Have you heard about an annuity plan? Here is everything you need to know!
An annuity plan is a financial product from a life insurance company exclusively designed for people looking for retirement solutions. It is the contract between the annuitant and the insurer wherein the insurer agrees to provide financial protection through a regular income. The plan will pay a fixed amount regularly after you retire or as desired until your death.
Life insurance companies provide life insurance plans and annuity plans as well. However, the purpose of both these products are different. Life insurance provides a sum assured to the nominee and protects your family's financial needs when you meet with an unexpected death. Annuity plans provide regular income when you are still alive.
The annuity plan can be considered a method to transfer the financial risk to the insurer even when you are alive. The plan works based on the premium amount paid. Based on the type of annuity plan chosen, the regular payments start incurring.
There are two basic types of plans for people over 50 years of age. Here, we will discuss them briefly:
Immediate annuity plan - The regular income from annuity starts immediately after the one-time purchase of the annuity plan.
Deferred annuity plan - In a deferred annuity plan, you can choose the deferment period at the beginning of the policy. The insurers will guarantee the annuity rate during the beginning of the policy to determine the future value of annuity. The regular income from the plan will start after the deferment period. The period is generally from 1 to 10 years.
The annuity payment mode is flexible. It can be monthly, quarterly, half-yearly or annually. When you stop paying for the annuity plan, the annuity plan starts paying for you. It is the best way to compensate with regular income post your employment phase.
Life insurance for people over 50 is possible. Term insurance plan, guaranteed1 return insurance plan etc., are some of the common options available. However, a life insurance plan becomes expensive over 50 years of age due to the following reasons:
Age - With the increase in age, the probability of risk increases, making a life insurance plan expensive.
Health - As you grow old, the extent of diseases and pre-existing ailments increase. The insurance company considers that you are at a higher risk of death compared to the younger population.
If you have not planned your retirement income early, you can stand safe with an annuity plan. You can park the lump sum amount you received from your employer as the retirement benefit as a one-time single premium payment for a lifetime income.
As the income is guaranteed1, you can plan for your retirement commitments in the best possible manner. You can make a rough calculation on the quantum of the amount required for your daily expenses, medical requirements and other utilities to decide the annuity plan.
You can avail of additional benefits by customizing the annuity policy for various needs. When you opt for an annuity plan from Tata AIA Life Insurance, the Tata AIA premium option allows you to make a single payment. The annuity plan also provides an option to increase benefits by extending it as a joint plan, including your spouse.
According to the joint plan, the regular income will be provided until either of you are alive. It is the simplest and the best way to protect your loved one in your sudden demise, like in a life insurance plan after 50.
The annuity plan does not have a maturity benefit. However, the insurers have customized the plan to help the policyholders avail of the return of purchase price feature. According to this plan, the nominee will receive a refund of the premium amount paid on account of the annuity plan as a death benefit.
You can also increase the annuity payment amount by using the top-up option. The additional annuity amount payable will certainly be based on the top-up amount paid and the annuity rate prevailing during that time. It is the best way to enhance the annuity plan based on the increasing needs.
Life insurance 50 and over is an important concern if you have not taken sufficient steps to manage your finances post-retirement. Annuity plans will become an important element in financial planning in such cases. It provides fixed income periodically after your retirement until death. Depending on your financial obligations and regular income requirements, you can choose between immediate and deferred annuity plans.
If you want to safeguard your retirement fund, utilize it for your medical expenses, and prevent unnecessary spending and ensure your dependents' financial needs, annuity plans become essential. Life after retirement is to enjoy, relax and explore. The financial crisis should not be a hindrance. Look for the best annuity plan and set yourself financially free!
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The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
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This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry.