Insurance plays an important role in one’s retirement planning. It acts as a life cover that protects one’s family in the event that the policyholder should die unexpectedly. It can also provide health cover to protect the policyholder and their family members against healthcare costs eroding their retirement corpus.
If you plan to retire in 10 years’ time and would like to purchase insurance to safeguard yourself and your family against unexpected situations, you can consider the following while making a pension plan:
Nowadays, insurers are providing special market-linked and traditional non-market linked plans. These plans could include a death benefit and additional riders like a life cover, guaranteed bonus and maturity benefit. Such plans also provide tax benefits. SBI’s Saral Pension plan, for instance, provides a guaranteed bonus of the simple reversionary variety for the first 5 years at 2.50% of the sum assured, and 2.75% for the next 2 years. Such a bonus is applicable only to policies which are in force.
If you’d like to consider building a corpus for retirement while also attaining life cover, an endowment plan might fit the bill. Endowment plans provide savings and life cover under a single plan. It acts as a life insurance policy which would help you save regularly over a specific time frame so that you can get a lump sum amount once the policy matures if you survive the policy term. Furthermore, if you should die unexpectedly during the policy term, your nominee will receive the full sum assured. Thus, returns are guaranteed. The lump sum can be used to fund your child’s educational goals, or marriage, or even for retirement planning.
Generally, a life insurance plan with a savings component can be referred to as an endowment policy and they can be either of a Unit-linked insurance plan (ULIP) or a non-ULIP kind. However, it is the saving-linked non-ULIP insurance plans that are generally termed as endowment plans.
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Money back plans are a type of endowment plan. The main difference between the two is that in a money back plan, you can earn assured returns at regular intervals. Thus, the sum assured is deducted on a regular basis and paid to the policyholder. In addition, the policyholder will get maturity benefits if they should survive the term of the policy. Furthermore, death benefits are extended to the nominee, should the insured die unexpectedly. For instance, LIC’s New Money Back Plan 20 Years provides a death benefit where the nominee will receive 10 times the annualised premium (which is 125% of the basic sum assured) as well as a vested reversionary bonus and the final additional bonus as well. Thus, if you would like to earn a regular income with assured returns, then a money back policy is a low-risk option as the premiums are not invested in the securities market.
Nowadays, you can purchase health insurance even when you are well into your 50s. The premium is much higher as opposed to the premiums charged to younger individuals. This is because there is an increase in health risks as you age. A policy with a total payout of Rs. 1 crore for example, will have a premium of Rs. 3,259 for 20 years old as opposed to a premium of Rs. 20,333 for a 50-year-old. However, it is worth it as the risks of contracting a serious health issue increase with age.
Loan insurance aids in ensuring that your family would not be financially burdened with having to pay back loans, if you should die unexpectedly. Some plans like the Bajaj Allianz iSecure Loan offers customers the option of either opting for an individual cover or a joint cover with a business partner or spouse. The death benefit which is payable at any point in time would be the prevailing sum assured. The premiums are determined on the basis of the policyholder’s current age, the sum assured, policy term, the interest rate of the loan and the payment mode for the premiums.
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