Retirement plans offered by life insurance companies are baskets of offerings. Its contents are insurance cover and investment for return. There are two phases of these plans. The first phase that begins after purchasing a plan is the one in which the premiums or one-time payment is made. This can be termed as the payment phase or payment accumulation phase. There is a prescribed duration of this phase for a particular number of years. The amount thus invested by you is with the insurance company. A certain percentage of this money is invested in equity where your money gets multiplied. You are assured of getting your principal investment back plus the money earned through income from security market investment is added to the kitty. Money accumulates through the tenure of the plan. Any retirement insurance plan in India follows this pattern.
The next phase is termed as vesting stage or pay-out stage when you start receiving payments from the insurance company. There is an age selected by you at which you begin receiving your payments. A retirement insurance plan in India also practices this phase. There is an annuity phase also. In this phase, you start receiving your pension. During the annuity phase, you can withdraw 33 percent of accumulated cash and the rest you receive in the form of a pension.
To be sure of buying the right retirement insurance plan, you should look out for whether there is an option for deciding on vesting age. You should also check if there is an annuity phase and what are the benefits attached. Whether you start receiving your regular monthly pension after crossing the vesting stage.
You should check whether your nominees start receiving payments of sum assured in the event of your demise during the time your money is being invested with the company.
You should make sure that the insurance company you are paying the premiums to is investing a percentage of investment in the equity market according to the directive of the IRDA of India. You should also make sure if you can withdraw up to 33% of the accumulated amount at one time in case you need it.
One should be sure of the amount of surrender charge in case you surrender your policy before the vesting age. You should choose the insurance company which has surrender charges as it suits your option.
You should know whether the insurance company will pay you a share in the profit the company is making, though the payment amount varies depending upon the profit made by the company.
With some research and lots of information about retirement insurance plan in India, you can confidently go ahead and buy this insurance product for your retirement.