Life insurance not only helps you secure your family’s financial future, but also ensures that your retirement planning goals are taken care of. Annuity plans, in particular, are specifically designed to ensure that your post-retirement life is stress-free and financially secure. Wondering what annuity is all about? Let’s decode this segment of life insurance for you.
What is annuity?
The term ‘annuity’ essentially refers to a sum of money that is paid out to a person periodically, for the rest of their life. In the context of retirement planning and life insurance, annuity plans or pension plans are life insurance policies that allow you to enjoy regular income even after you have retired.
To know how much retirement annuity you will need to lead a comfortable life in your golden years, you can make use of a retirement calculator. Then, based on your specific needs and the requirements of your family, you can choose the suitable kind of annuity plan.
Want to find out more about the different types of annuity plans available to you? Check out the alternatives in the following section.
Different types of annuity
Based on the nature of payment of the retirement annuity, pension plans or annuity plans are of two major types.
1. Immediate annuity plans:
In immediate annuity plans, the annuity payments start right away. The insurance service provider agrees to pay the annuity amounts to the policyholder immediately after they have purchased the plan. This is why they are known as immediate annuity plans.
2. Deferred annuity plans:
In deferred annuity plans, the annuity benefits accumulate over the investment period. And then, the annuity payouts from the insurance company start at a later date, after a predetermined number of years following the purchase of the plan.