Retirement Planning with Life Insurance

August 08, 2021

Retirement Planning with Life Insurance

There are multiple types of life insurance policies that are focused towards retirement planning. Retirement Insurance plans can be different from the standard government pension plans in India. There are different kinds of Life Insurance policies available online today, for you to make the most of your retirement. By scouring through these, you can find the best retirement plan in India in 2021.

Here are some of the options you can choose from.

  • Retirement plans
  • Unit Linked Insurance Plan (ULIP)
  • Endowment Plans
  • Whole Life Plan.

Retirement Plans

Pension or retirement plans, as the name suggests, are created to meet your financial needs after you retire. In India, the sooner you start, the more pocket-friendly the government pension plans get. Here is how they work:

There are two phases; the first being - the accumulation phase, followed by the annuity phase.

  • Accumulation Phase: This is the first phase of your Retirement Insurance plan. In this, you are expected to pay premiums throughout your policy's tenure. Your insurance company will collect your premiums and invest them in a variety of securities and over time, your investments will grow as your cumulative capital.
  • Annuity Phase: This is the second phase of your retirement plan. Here, the seed of your investment blossoms and you begin to receive returns on your investments. Upon the maturity of your policy, once you retire, you start to receive a regular income. Life insurance companies tend to structure the vesting age between 50 to 70 years of the policyholder. During the annuity phase, you have the option to withdraw some amount of your fund, depending on your policy, while the rest can be used in instalments.

Annuity plans pay your pension through the annuity option, depending upon the payout mode you have selected. This annuity mode can be quarterly, monthly, half-yearly or yearly. They substitute your monthly or quarterly cash flow once you retire.

Unit Linked Insurance plans

A unit-linked insurance plan is a combination of an insurance and an investment. Part of your premium is used for providing a life cover as mortality charges, with the rest being invested across various funds. Funds can be allocated as per your appetite for risk. There exist a range of investment options, such as investing in equities, debt, bonds, hybrid funds or market funds. To put it simply, your wealth is accumulated through your investments, while your loved ones are also secured with a death benefit.

Endowment Plans

Another type of Retirement Insurance plan is an Endowment Plan. This plan gives you the option to save for the long term. To add to this, a part of your premium is utilised to give you a life cover as well. If the assured life survives the term of the policy, the company pays a Maturity or Survival Benefit to the insured party. Alternatively, if the life assured passes away during the policy period, the insured company pays a death benefit to its nominee. There also exists the likelihood that one can gain bonus payouts periodically that are paid upon the maturity of the endowment policy or to the nominee, under a death claim.

Whole Life Insurance

A complete or whole life insurance policy tends to cover the individual for a longer duration than a standard life insurance. The policy tenure usually lasts until the insured turns 100 years of age. If the life assured passes away prior to the policy maturing, the sum assured in addition to any bonuses, will be paid to the nominee. At the same time, if the life assured survives up to 100 years of age, the matured endowment coverage will be payable to the insured life. Whole Life Insurance plans also tend to offer partial withdrawals or regular payouts once their premium payment term is completed, which can be very helpful post retirement.

The Bottom Line

To find the best retirement plan in India in 2021, make sure you do these three things. Firstly, plan ahead and start investing in your youth - the longer you stretch your accumulation phase, the more your returns will be at the time of retirement. Secondly, start determining the amount of money you would require to continue with your current lifestyle after your retirement. Finally, begin researching for a Retirement Insurance plan that will suit you the best. Check out retirement plans available by ICICI Bank and begin your retirement planning journey, today. Since there are many options, make sure you take your time before committing to a plan.

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