Defined as a contract between you and the insurance company where you make a one-time or series of payments and in return, you get regular payments starting immediately or in the future.
The main goal of any annuity plan is to offer you a steady stream of income throughout retirement. There are different types of annuity plans available to individuals, including Variable Annuity, Direct Annuity, Fixed Annuity, and Fixed Indexed Annuity plans.
An annuity insurance plan offers protection against all risks that may arise during your retirement or old age, this includes income replacement, inflation and investment risks.
Here are five things you should know about annuity plans:
1. There is a difference between direct and deferred income annuity plans
One of the main things you need to understand about an annuity plans is that you can choose a plan that offers payments that begin in the future (deferred income annuity plans) or you can choose a plan that offers payments that start immediately (immediate income annuity plans).
When talking about deferred annuity insurance plans, individuals begin receiving payments at an agreed future date or age. Hence, under such an insurance plan, regular investments are collected up to a predetermined age or date. Policyholders can also make payments for deferred income annuity plans as one-time premium payments.
That Future Generali Immediate Income Annuity Plan offers a variety of benefits, including a fixed annuity for the rest of your life. In the unfortunate case of your death, the purchase price is paid to the nominee and the policy expires. Under the plan, you have the flexibility to choose a monthly or annual payment mode.
In fact, the policy also offers annuity cards that guarantee convenience in receiving the annuity amount. Under the Generali Future Direct Income Annuity Plan, you decide your own purchase price. This means you decide on the single premium amount you want to invest, in order to receive a lifetime annuity.
2. Variable Annuity Plans come with investment risks
When talking about variable annuity plans, it is important to remind yourself that there is investment risk involved in such plans. In such a plan, you can choose place your investments in a wide range of asset classes from conservative, low-risk instruments such as secured fixed accounts, and government bond funds to riskier investment instruments such as growth, small cap, medium cap, large cap, capital appreciation, aggressive growth, and emerging market investments .
YYou also have the option to invest in more balanced mutual funds. Even though such plans have a guaranteed minimum annuity, there are still risks involved, and you will be charged a fund management fee. The main thing to understand here is that the rate of return you will receive on your annuity will depend on the performance of your fund. However, you do have control over the type of instrument you invest in, making it risky or low risk to suit your taste and finance target.
3. Most annuities for early withdrawal penalty
Like most insurance policies, an annuity is a long-term policy contract and if you withdraw your policy earlier than stated, you will have to pay a surrender fee. The surrender period of your annuity will vary from 2-10 years and usually the costs associated with the same decrease over time.
4. You can add a rider to your annuity plan
Just like any other insurance policy, you can add a rider to an annuity plan to upgrade the policy. Riders for annuity plans provide benefits at an additional cost and can be either living riders or death benefit riders.
Living passengers provide benefits as long as the annuitan is still alive, while death benefit riders provide benefits for prospective policies.
5. Most annuity plans come with a free viewing period
The free viewing period is basically the period of time as specified in your contract where you can get a full refund of your plan if you don’t like the annuity plan you signed up for. The viewing period varies from insurance company to insurance company but can vary between 10-30 days.
Make sure you use this period to determine if the policy you choose is right for you.
