Everyone has to go through the age of old age at some point in life. In such a situation, every person wants to strengthen himself financially in old age, so that even when the body is not fit to work, he still has a fixed income in the form of pension. During the pension plan, you must have often heard a word Annuity. What happens, annuity, know about it here.
Understand what is annuity
An annuity is an insurance product, in which there is a kind of contract between you and the insurance company. In this, a person has to invest a lump sum. In future you are paid instead monthly, quarterly or annually. Annuity is used as part of retirement portfolio. In this, as long as you survive, you get a fixed income. After your death, the nominee is entitled to collect the amount.
Know what are the types of annuity
- Life Annuity: In this, the annuity is paid till the death of the person. You can choose whether the payment is monthly, quarterly or annually.
- Life Annuity with Return of Purchase Price: In this, the policyholder will get the annuity payout till his death. After death, the amount he had paid to buy the annuity is returned to his nominee.
- Annuity for Guaranteed Period: Annuity can be paid for a certain period even after the death of the policyholder. After the completion of the specified time, the annuity also stops.
- Joint Life Annuity: In this, after the death of the policyholder, annuity is paid to your spouse for the entire life of the policyholder.
- Joint Life Annuity with Return of Purchase Price: In these plans, after the death of the policyholder, his/her spouse gets annuity for the entire life and after his death, the nominee gets the initially invested amount.
no tax benefit
The annuity is clubbed with your income, so you do not get any tax exemption in this. Policyholders have to pay tax according to the tax slab they fall in. Accordingly, tax has to be paid.
keep in mind
In some plans, the annuity income stops when an unfortunate event occurs. In such a situation, it is better that you take a joint life annuity plan. In this way, you can secure the future of your spouse or child. In this, they will continue to get a fixed income for the whole life.