A normal life insurance involves the payment of reular premiums by the policyholder in return for a cash benefit on the maturity of the policy or death. The annuity policy is the reverse of this situation. It provides a regular income till death in exchange for a lump sum payment at the time the aunnuity contract is purchased. With an increasing number of retirees, interest in annuities has grown as they are a safe vehicle to ensure financial security.
Funds collected from annuities are invested in government securities or other fixed income instruments. Such investments enable the company to obtain the highest possible income and at the same time match its assets with its liabilites. The return of annuiites comes from two elements: each annual payment consists of both interest and capital.
The most widely used form of annuity is the immediate annuity. In return for a capital sum, the company guarantees to pay a stipulated amount of income to the policyholder for the rest of his life. A variant has been devised for annuitants who fear that they will get little benefit should they die soon after purchasing the annuity. The guranteed immediate annuity plan ensures that the income derived from it is paid over a fixed number of years and thereafter until death. Thus the insurance company continues to make payments even if the annuitant passes away. The money will be payable to whoever he has named in his will or to his estate.Besides using the maturity procceeds from an endowment policy to buy an annuity, annuities are more commonly bouthgt using CPD asavings under its compulsory Minimum Sum Scheme. Typically, these are the deferred annuitites purchased at age 55 and the annuity payments commence at age 60.
Annuities are designed to provide retirement income to retirees. A person who receives the annuity payment is known as an annuitant, or a retiree in this case. A life annuity policy ensures that the annuitant or retiree will continue to recceive annuity payments as long as he is alive to meet his living expenses when his income ceases after retirement. Therefore, retirees, especially those who are afraid that they will outlive their assets, should buy adequate annuity.
Funds collected from annuities are invested in government securities or other fixed income instruments. Such investments enable the company to obtain the highest possible income and at the same time match its assets with its liabilites. The return of annuiites comes from two elements: each annual payment consists of both interest and capital.
The most widely used form of annuity is the immediate annuity. In return for a capital sum, the company guarantees to pay a stipulated amount of income to the policyholder for the rest of his life. A variant has been devised for annuitants who fear that they will get little benefit should they die soon after purchasing the annuity. The guranteed immediate annuity plan ensures that the income derived from it is paid over a fixed number of years and thereafter until death. Thus the insurance company continues to make payments even if the annuitant passes away. The money will be payable to whoever he has named in his will or to his estate.Besides using the maturity procceeds from an endowment policy to buy an annuity, annuities are more commonly bouthgt using CPD asavings under its compulsory Minimum Sum Scheme. Typically, these are the deferred annuitites purchased at age 55 and the annuity payments commence at age 60.
Annuities are designed to provide retirement income to retirees. A person who receives the annuity payment is known as an annuitant, or a retiree in this case. A life annuity policy ensures that the annuitant or retiree will continue to recceive annuity payments as long as he is alive to meet his living expenses when his income ceases after retirement. Therefore, retirees, especially those who are afraid that they will outlive their assets, should buy adequate annuity.
