What are the must-know things while choosing a pension plan for myself?

Rahul was looking to buy a pension plan for himself. He was 42 years old and understood the importance of starting a retirement corpus early on. He did not want to wait till he was too close to his retirement as he knew that would make it difficult for him to build up a substantial fund. So he went shopping for a pension plan. To his surprise though, there were many factors that Rahul found he did not know about the pension plans. It took him a while to do his research and he bought a suitable plan only when he was sure about the clauses of a pension plan.

If you too need some help with the understanding of the pension plans, take a look at this article where we tell you about the main features of the pension plans in India.

Features of pension plans: Things to remember:

Take a look at these important features of a pension policies so that you know what kind of plan you must opt for and why.

·         Types of annuity:  Pension plans offer two kinds of annuity options to choose from. You can have a deferred annuity or an immediate annuity. In a deferred annuity pension plan, you invest small sums of money over a long period of time. The money you put in is saved din a fund and after your retirement, regular payments are made out of this fund. This helps you to have a regular source of income. Deferred annuity plans are very popular types of retirement plans. Immediate annuity plans are types of retirement plans where you pay a lump sum amount of money after your retirement (or when you want the plan to kick in) and you start getting regular payouts immediately after that.This is a good option if you want to invest your retirement bonus or any other large sum of money you may receive and utilise it in your retirement years.

·         Taxation:  You must be aware of the taxation norms before you buy a pension plan. The premiums you pay on your retirement plans are tax exempted under Section 80C of the Indian Income Tax Act. The income that you earn after the plan matures, however, is fully taxable. So you must keep this point in mind before you invest in a good retirement benefit plan.

·         Withdrawal limit upon maturity:  If you invest in a deferred annuity pension plan, then you can withdraw only 1/3^rd of the accumulated amount when the policy matures. This is important to note as many people expect to get back the entire sum along with the interest component. However, this doesn’t happen in pension policies and you have to buy an annuity plan with the remaining amount. Regular payouts will then begin from the annuity plan and you will get a regular source of income thereafter.

·         ULIPs v/s Endowment plans:  Most of the pension plans available from the insurance companies in India are either endowment plans or ULIPs. You have to therefore make a choice between the two before you start the plan. If you have a low risk appetite and do not want to risk your retirement fund in any way, it is a good idea to invest in a traditional endowment plan. If however, you want to take a few risks and look to multiply your returns, you could invest in a ULIP. It is safe to do so as you get a death benefit and a sum assured. A part of your funds are invested in the markets and you stand to earn high dividends from them and get more money for your retirement days.

So as you can clearly see from the points mentioned above, the pension plans in India are varied and come with a lot of features. Understand the plans before you invest. This will help you in getting the most out of your pension policy and you will be assured of a financially strong retirement. The post retirement days are the golden days of your life and you must be economically well off to enjoy these days. So rather than depending on anyone else, take charge right away and pave a golden future for yourself. 

Source: What are the must-know things while choosing a pension plan for myself?

How to Lower Your Life Insurance Premiums without Compromising on Coverage?

The Life Insurance Policies  are the must have term plans and are crucial in today’s world as it gives you the financial protection against the unforeseen health situations like sudden illnesses or accident related treatments. Though the term plan gives an array of benefits like protecting you and your family from different health conditions based on the plan chosen and gives the tax benefit, still these come with an inevitable harder side of it, the premium– It is the expense towards protection of the family. 

Premium is the undeniable part of a term plan and is included in the family budget.

Term plans are a no-frill product that insures you for a predetermined period and ensures the financial security of your family in case of unexpected demise of you during the term of the plan. There are certain factors like your age, genetic disposition and your gender which play a role in determining your premium by the insurance companies.

However, there are ways to keep the premium lower without compromising the coverage benefits.

·         Determine your coverage requirement–Selecting a term plan that optimizes your budget and the coverage requirement is very important. Taking a higher coverage will cost you higher premium and many a times basic coverage fits the requirements for most of the people.

·         Avoid unnecessary riders or add-on – Since Riders and add-ons for extra coverage of any kind increases the premium, evaluate carefully the additional coverage requirement.

·         Staying healthy to be eligible for lower premiums – A healthy person has less chance of getting lifestyle diseases like diabetes and heart issues also there is less likelihood of early death.That interprets into lower premiums charged by insurance companies for your term plan. Avoiding smoking and drinking can save you on premium payment as insurance companies charge extra for these unhealthy habits. Prevent obesity as well to get the benefit on your premium.

·         Starting the term plan early in life–When you are young and healthy, the premium is much lower and this remains usually same until the policy term is over. Policy term could span 10, 15, 20 or 30 years. Locking in a higher term could lock your premium to a lower amount. You will get some flexible term plans which gives add-on cover at different stages like marriage and parenthood requirements. These work to your benefit with lower premium if you start those at early stage of life. Also gives the option to increase the coverage as required.

·         Save money on Annual payment option – Insurance companies provide flexibility of payment schedules like monthly, quarterly, half-yearly or annual. But annual payment turns out less expensive overall as the whole amount is paid in one shot and the company saves the repeated administrative cost on it and pass on the benefit to the customers. If there is no budget constraint, then go for an annual payment and save some on your premium.

·         Buying term plan policy online – Buying a policy online is a cost effective alternative for the company as well as for the customers. It reduces marketing, distribution and office work of the insurer since the customer does all the input of information. The saving that company makes in this context passes on to customers, at least partially in the form of reduced premium.

Term Insurance Premium Calculator -

This is the simple and specially designed tool that helps a perspective buyer to determine the premium amount. You can calculate the premium of term plan that you need to pay in order to get insured for a specified sum in case of unfortunate demise of the policy holder. In this way it helps you to compare the plans offered by different insurers and opt for the best suited one. To get a term plan online and to avail all the benefits of an online policy purchase, this calculator is the most used and appropriate tool for comparing the different insurers on a single common platform in India.

The premiums decided by the insurance companies depend on the rating and underwriting methods of various factors and parameters of individual companies. It is a good idea to shop for the benefits and coverage and comparing the premium for the different term plans offered by companies before purchasing one. Additionally, you need to compare the insurer performances regarding their customer service records, claim settlement procedure and timeline as well as the overall rate and reputation of the company.

Source; How to lower your life insurance premiums without compromising on coverage?

BEST AGE FOR INVESTING IN PENSION SCHEMES – CLICK2COVER

Do you know what pension plans are designed for? Yes, they are solely designed for your retirement planning. Pension plans provide you with a promise of income inflows for your entire life. This way, when you retire, you do not have to worry about your income coming to a standstill. Pension plans are, therefore, a good tool for retirement planning, aren’t they?

Yes, they are and that’s why you should have a pension plan in your financial portfolio if you want to plan for your retirement. But, do you know when you should buy a pension plan? Since retirement is perceived to be a long period away, we delay in investing in a pension plan. But, is the delay good?

What if I tell you that though your retirement is far away, you should start planning for it right now? Yes, you heard me right. Retirement planning is an essential financial goal, one which you should start at the earliest. Want to know why? It is because of the following two reasons:

·         The miracle of compound interest – if you remember your math lessons correctly, you would know what I am talking about. Compound interest lets you earn interest on any interest you have already earned. Confused? Don’t be. Through the process of compounding, any interests you earned on your savings get added to your invested amount which is again eligible to earn future interests. Due to this compounding feature, if you make investments over a longer period, you can accumulate a good corpus. For this to happen, you need to start saving early.

·         Affordable savings – when you start investing in pension plans from an early age, you can make small affordable investments to accumulate a substantial corpus. Since compounding works on your investments, such small investments made over a long tenure can yield very good returns and give you a huge corpus.

Let us understand these points with a simple example:

Suppose you are 30 years of age and want to invest in a pension plan which you would require on your retirement at age 65 years. If you make monthly contributions of Rs.2000 for 35 years, you get a corpus of Rs.28.49 lakhs (approximately) or Rs.29 lakhs at an interest rate of 6% per annum. Now, if you were to start investing in a pension plan sometime in your 40s, let’s say at 45 years, and want the same corpus, do you know how much you would have to save every month? Rs.6300 (approximately), almost three times the original savings. Imagine!

This is what saving early implies. Investing in a pension plan at younger ages is, thus, advised so that you can accumulate a good corpus and that too by making small and affordable savings.

So, one thing is certain. You should start buying pension plans when you are young. But when we talk about the best age, what should it be? Let’s find out:

In your 20s

20s is the period of fun, frolic and merriment. Graduating from college and getting that new job brings in financial independence and you are too busy fulfilling your various dreams. At this age, pension plans take a backseat. Even then, after fulfilling other priorities, you must endeavor to invest in pension plans even when you are in your 20s so that you can get a good corpus on retirement.

In your 30s

This phase is a serious retirement planning phase. Despite planning for children’s future and creating assets, you should start saving small amounts for your retirement planning. For your affordability, you can start saving small amounts monthly towards a pension plan and later supplement your savings through another plan.

In your 40s

Investments in pension plans should be aggressive at this stage. If you had already started saving in your 30s, you can make small contributions but if you still haven’t bought a pension plan it is time you wake up. Buy a pension plan today and start your investments.

In your 50s

A phase where retirement planning takes the center stage, isn’t it? In this stage you should supplement your retirement investments by buying other pension plans. If you have already invested in a plan, stay invested.

In your 60s

With retirement round the corner, you should simply sit back and watch your investments yield returns. You can invest in immediate annuity plans whereupon you would get annuity payouts instantly. Find the best pensionplans in India with single premiums for this purpose.

Retirement is a golden phase which can be enjoyed if you have made financial provisions for it. Pension plans should be bought at the earliest for the maximum possible benefit. If you are dilly-dallying your retirement planning, take heed of this advice and start planning your retirement today.  

Source: BEST AGE FOR INVESTING IN PENSION SCHEMES