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What Is The Difference Between Immediate And Deferred Annuity Plans
[Posted by: InsuringIndia Blog on 28-Mar-2016]
With recession at its peak across the world and in India, the good old days of expecting an adequate financial security cover from just the job have come to an end. Whether you’re a young professional who’s just started his career or a seasoned professional with years of experience and a top end salary, the harsh reality is that you have to plan for a pension corpus. Add to these factors that after retiring at 60 years of age, you need a solid financial backing. Also, technological advancement has made human life longer and life expectancy is over 90 years, it makes more sense to buy a pension plan which is also referred to an annuity plan, that will take care of you in your sunset years, regardless of the fact that your company may be setting aside a PF or a related corpus for you.
 
Types of Annuity Plans and what do they mean?
 
Annuity plans are offered by life insurance companies and usually come in two categories—Immediate Annuity Plan and Deferred Annuity Plan. As the term suggests, an immediate Annuity Plan entails giving the company a lump sum premium in one go, instead of phased out premiums over frequent intervals. Once this is done, a guaranteed amount is given to the annuity holder on an ‘immediate basis’. This means instead of waiting for a number of years, you can get an assured sum faster as your pension. 
 
Benefits of an Immediate Annuity Plan
 
With this plan, you can actually rest easy about your future and drop all fears of overspending your income.
•        Now, you not only continue to earn your salary but also get an extra amount on the side. Clearly, it’s a happy situation.
•        Tax saving is yet another obvious but significant advantage here.
•        You can still plan for holidays and other important social & personal events in sunset years, without worrying about money.
•        The financial future of your family is taken care of, even after your death.
•        Even if you are in your early/late thirties or forties, you still stand to make huge gains via this type of plan.
 
Deferred Annuity Plan is the complete opposite where premium is paid on a regular basis. This means that the pension is not given immediately but over a period of time depending on the plan you’ve bought. It has two phases—the first one is the savings stage where the premium paid is invested. The second one, known as the income phase. Here, all the money that you’ve accumulated in the first phase is given back to you as pension income.
 
Benefits of a Deferred Annuity Plan
•        Tax benefit.
•        Depending on the type of plan you choose, an income in the years post retirement is guaranteed.
•        Good option if you’re seeing to have a long term investment for yourself.
•        If you’re a young professional in your twenties, then you can invest into this plan a build a sizeable corpus.
 
Always go online to compare annuity plans, the sops, riders and advantages before you decide what’s best for your requirement. It not only saves you time and unnecessary expenditure, but also is a faster and more efficient mode to help you choose wisely.
 


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*This is based on the difference between the highest and lowest premium's for a single person, age 25, looking for an individual health policy with the sum insured of Rs. 5 lakhs.
**This is based on the difference between the highest and lowest premium's for a single person, age 25, looking for a term plan, with the sum insured of Rs. 30 lakhs, and the premium paying term of 30 years.
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