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There are many investment instruments available in India where you can invest to create your retirement corpus. A retirement insurance plan, offered by life insurance companies, is one such instrument that allows you to avail dual benefits of life insurance as well as investment in a single integrated plan.A typical retirement insurance plan consists of two phases. The first phase is known as the accumulation phase, during which you’re required to pay annual premiums towards your plan. A part of this premium is used to provide life insurance benefits to your whereas the other part is invested in securities approved by the insurance regulatory body of India.During the accumulation phase, the money invested by you every year keeps on growing as per the returns provided by the securities in which they are invested.The second phase is known as the annuity phase in which you can start withdrawing your invested money in form of pension. Generally, an investor is allowed to withdraw up to 33% of the accumulated money on the date of annuity and the rest is paid to him/her as monthly pension.
Choosing the best suited retirement insurance plan for yourself
There are different types of retirement insurance plans available in the market. Only after knowing about them, you will be able to decide which one is best-suited for you.
- Unit Linked Insurance Plans (ULIPs) ULIPs are long-term plans that invest a portion of the investment in equity-based funds. If you’re young and have a long investment horizon, you can invest in ULIPs with higher equity constituent to earn potentially good returns. Though ULIPs offer a chance to build a large corpus through the effect of compounding, it also carries a fair bit of risk due to the equity exposure.
- Traditional retirement insurance plans These types of plans are more suited for risk-averse investors. With such plans, you’re required to make periodic contributions towards your retirement corpus. A portion of your investment will be used to offer death benefits to you until the tenure of the policy. In case you survive the policy period, you’ll be rewarded with maturity benefits in form of a sum assured or regular pensions.
- Participating retirement plans These types of plans allow you to invest in shares of a company and in return, the company will give you a share of its profits. Like ULIPs, the returns from participating retirement plans are not guaranteed and it depends on the performance of the company.
The Final Word If you’re a conservative investor, you can go for the traditional retirement plans that offer fixed benefits on maturity. However, if you’re young and can take a few risks, a good idea is to go for unit-linked plans as they have the capability to produce much higher returns than traditional investment avenues.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
