23 AUG 2016
How to select the perfect annuity plan?
If you are looking for a stable and secure income in your twilight years, annuities can be the right product for you. But before you decide on buying an annuity product, you would do well to look up the product in the light of the below features. This will ensure that you are buying the perfect annuity product.
Annuities are inherently safe products. They are designed in such a way that you get regular and assured payouts from a certain period of time for life. This is in exchange for regular premiums for 20-30 years before retirement or a single lump sum payment. The policyholder or annuitant, as he is referred to, may need the payout to continue for a period of 20-30 years after he's retired. In such a case, you need your money to be in safe hands so that there is no problem when the money is due to come back to you going forward.
“The provider of an annuity must be in a position to meet the liabilities that may change dramatically due to a variety of factors such as increasing longevity, decreasing interest rates, inflation etc. Therefore, a solvency of the company providing annuity is critical. The higher the financial standing of the company, the better it is," says Dr. P Nandagopal, founder & chief mentor of financial services start-up OpenWorld Money.*
Annuity products being long-term, most annuity providers are very conservative in terms of interest rates. This is because they have to build a contingency reserve to meet any adverse financial events like market and interest rate movements. This can prove to be detrimental to a lot of annuitants who have pinned all their money to annuities in the hope of deriving regular payouts to keep them afloat in their sunset years. As it is, inflation constantly erodes the real value of their money. Low returns could make it difficult for older folks who cannot move their investments to a better-paying annuity provider at their ripe age.
Past track record of insurer
The financial strength, and past record, especially with respect to payouts can give you an insight into how strong, stable, and capable that insurer is. Do visit the website of life insurance providers like Edelweiss Tokio Life before you make up your mind regarding which annuity plan to buy. Look out for reviews on the internet about the company and make an informed choice.
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