Annuities & Life Insurance
You'll need two different programmes to deal with both of these scenarios: life insurance and annuities.
Both are long-term financial plans, but there are some distinctions.
If you die, life insurance protects your family financially, whereas an annuity protects you from outliving your assets.
The following are some of the commonalities between the two plans:
1. Long-term investment and insurance strategies
2. Can provide inflation-adjusted and tax-adjusted growth
3. Long-term investments that are the safest
4. An annuity can be created from a life insurance policy.
5. Annuity schemes frequently include a life insurance component.
The purpose of annuity is to provide for one's own needs.
When you acquire an annuity plan, you're investing for your financial security, especially if you don't have a steady source of income like a job.
When you get a life insurance policy, on the other hand, you are investing in a better future for your loved ones.
The finest annuity plans are ones that can ensure your financial security once you retire.
As a result, annuity provides you with financial security.
The goal of a life insurance policy, on the other hand, is to secure the financial security of your dependents in the event of your death.
Save enough money for your child's education and marriage plans.
Ascertain that the child will receive the planned financial support even if you die young.
As a result, life insurance is the ideal financial investment to secure your dependent's aspirations and life.
Annuity can be postponed
The time you get the plan benefit is another difference between life insurance and an annuity plan.
The life insurance benefit is simple to understand and use, and it is available right now.
A life insurance benefit, for example, ensures that your beneficiary receives the lump sum amount in the event of your death (or regular payment starts).
This benefit is available as soon as the life insurance accepts your premium.
Annuity plans, on the other hand, allow you to pick whether you want monthly or quarterly regular payments right away or a few years later.
It means you can put money into an annuity now and defer the regular payments for a few years.
Assume you have a retirement fund of Rs. 50 lakhs set aside at the age of 55, but you won't require a regular income till you're 60.
You can put the money into the Pension4Life plan and choose to start receiving a regular income when you turn 60, which will be five years from now.
In addition, if your annuity plan has a life insurance component, the coverage will begin immediately after purchase.
Annuity Is Beneficial Throughout Your Life
Life insurance products are designed to help you in the event of your death, injury, or disease.
An annuity, on the other hand, operates while you are still alive.
When you purchase an annuity, you have the option of continuing the annuity for a set period of time or until your natural death.
In either scenario, the annuity plans will only last as long as you (or your spouse in the event of a combined life annuity) live.
Life insurance policies such as term insurance, on the other hand, only work after your death.
Annuity Plans With Life Insurance
An annuity is more than just a way to guarantee a steady income after retirement.
If you wish to combine the benefits of life insurance and health insurance in one plan, you can do so.
Life insurance assures that your spouse or nominee will continue to be financially secure after you pass away.
Almost all life insurers' annuity plans include life insurance coverage.
The payment of an annuity is taxable
In the financial year in which you receive the annuity payment, it is taxable as salary income.
After the age of 60, if you get more than Rs. 2.5 lakhs (Rs. 3 lakhs under the previous regime) in a financial year, the excess money will be taxable.
However, any sum you get from a life insurance policy after the lock-in period, whether at maturity or before, is tax-free unless:
Your annual investment in the plan was greater than 10% of the plan's base life cover.
You have invested more than Rs 2.5 lakhs in ULIP plans in a single year (bought after 1st Feb 2021)
Annuity is a great way to leave a legacy
When you buy a lifetime annuity, you're also buying a legacy plan.
A lifetime annuity, such as the Pension4Life plan, ensures annuity income until your death.
Following your death, the remaining funds are distributed to your nominees as a lump sum payout.
In the case of joint life insurance plans, the pension may be paid until your surviving spouse passes away.
Even in this instance, the annuity plan will reimburse your nominees for the remaining sum.
As a result, it is evident that life insurance and annuity programmes are not the same thing.
To maximise the advantage and safety for your family and yourself, you should combine the two when planning your financial journey.
Canara HSBC Oriental Bank of Commerce Life Insurance annuity products have features that ensure you may confidently accomplish your final financial goals.
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