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Top #5 Insurance Options to Consider while Planning Your Retirement

Updated On Feb 10, 2021

Today, insurance has become an integral part of our lives, and the need for insurance is felt in every phase of our life.  As a fact of the matter, life and the property of any individual is always open to certain risk factors like the risk of any destruction, risk of death, risk of illness, etc. and these risk factors lead to financial losses as well.  So, by insurance, you are transferring the outcome of these risks to the insurance provider.

Retirement is an important phase in the life of every individual, be it a salaried individual or an entrepreneur. It is quite necessary to plan your finances in such a way that you can save enough to maintain a proper life even after you retire and you need to start this planning quite early in your life. Insurance plays a significant role in your retirement planning and the implementation of this planning.

What is retirement planning?

Retirement planning is defined as a process by which you should manage your short term and long term finances both in such a manner that you can accomplish your financial objectives when you are working and even when you have retired. By retirement planning, you are thoroughly analyzing your long term financial goals, your present financial situation and the future inflow of cash to create a smooth plan for your future.

Retirement planning will help you in determining the amount you are saving today for your retirement, how you are investing these savings to obtain good returns and how you should utilize your income saved for retirement after you have actually retired. 

Reasons and benefits of retirement planning

In earlier days, the life expectancy of people used to be 60 years. But today, not only the lifestyle of people but also the life expectancy of people has also changed. Nowadays, people tend to live longer, and it is quite apparent the longer you live more is the fund needed to meet your requirements. You cannot keep on working till the end, and so, you will have to save money for maintaining a basic lifestyle in your older days.

If you have a proper retirement plan in place, you will be able to meet specific requirements of your family. There might be some requirements like education or monthly expenses for which your family might be dependent on you even after retirement. Retirement planning helps you to support your family in this way. 

You can contribute to the demands of your family without any worries. You might feel like gifting your grandchildren something good or funding some of their expenses, and with adequate retirement funds, you can do so. Retirement planning will not let you depend on anyone financially, even when you do not work yourself.

Insurance and Retirement Planning

When thinking about retirement planning, insurance should be your most preferred option as it plays a vital role in making proper retirement planning.

Life Insurance acts as an ideal instrument for retirement planning. It will provide coverage in case of the unfortunate and unexpected death of the policyholder. The premiums for life insurance policies are quite affordable and have tax benefits which can be considered as savings from the life insurance plans. These savings contribute to your corpus to be used post-retirement. 

There are many such life insurance plans such as Bajaj Allianz i-Secure plan, Aviva I-Life Plan, HDFC Life Sanchay Plan, LIC New Jeevan Anand Plan, etc. available which provide life cover and are also good investment tools which give guaranteed returns.

Life Insurance plans like Unit Linked Insurance Plans (ULIPs) provide a lot of flexibility to the policyholder by allowing the redirection of premium. It is an insurance and investment tool. Some of the best ULIP options to invest in 2019 can be ICICI Pru Smart Life, Aegon iInvest, SBI eWealth, Bajaj Future Gain, Aviva iGrowth, etc. Life Insurance plans like the Money-back plans, Endowment plans, and Retirement or Pension plans help in providing a steady income after retirement and contribute to building your post-retirement corpus.

Health Insurance plans are also an important contributor to your retirement planning. Suppose, you are nearing your retirement, and suddenly you fell critically ill. There was a lot of medical expenditure, and if you had no health insurance; all your savings would have been spent in your treatment affecting your financial planning for retirement. Moreover, after retirement, you will have a limited income and paying medical expenses at old age from that limited income would be difficult. In such a scenario, a health insurance policy would be your saviour.

Insurance options you should consider while retirement planning

1. Purchase a proper retirement plan: 

A retirement plan is a type of life insurance policy which helps in building the corpus for your retired life. These are called annuity plans and comes with multiple annuity options.

These retirement plans include death benefits, maturity benefits and add-ons like life cover and bonus.  There are Vesting benefits available if the insured person survives the maturity age. These retirement plans such as LIC Jeevan Akshay 6 Plan, LIC Jeevan Nidhi Plan, Reliance –Smart Pension, Bajaj Allianz –Pension Guarantee plan, etc. are otherwise known as an annuity or pension plans and will be of great use for your post-retirement period.

2. Purchase of adequate “lifelong” health insurance

As said earlier, the purchase of adequate health insurance is a must while retirement planning. It not only saves you from spending your savings on medical bills but also will take care of the various expenses which can arise due to increased illness in old age. So, you must opt for a health insurance plan with lifelong renewability. Most health insurers offer lifelong renewability, but checking the same is an important step of “retirement planning”.

However, it is ideal to purchase a health insurance policy at an early age as the premium increases with the increase in age. You can buy it at an early age and go on including riders as you start ageing.

You must read Top 5 health insurance riders at a glance

3. Purchase an insurance plan providing life cover and savings

An endowment plan is a perfect option here which acts as a savings instrument and a life insurance tool as well.  By this, you can save a lump sum amount over a particular period of time and at maturity, you will obtain the lump sum amount. 

Suppose, there is an unfortunate demise of the policyholder before the maturity; the nominee of the policyholder will receive the death benefit. So, this is a dual-purpose tool contributing to retirement planning.

4. Money-Back Plans

Money-back plans are a risk-free option to obtain the sum assured in regular intervals as survival benefits. If the policyholder survives the maturity period, then maturity benefits will be received by him. In case of the unexpected demise of the policyholder, the death benefit will be paid to the nominee of the policyholder. 

So, money back plans such as Bajaj Allianz Cash Assure, Reliance Super Money Back Plan, etc. are the best option to obtain a steady income after retirement. 

5. Purchase a loan insurance for your outstanding debts

Loan insurance is a plan to provide life cover to the person who has taken the loan or in other words, the borrower.  The death benefit which will be paid to the nominee of the borrower can be used to pay back the loans taken. This plan can be purchased as a single-life or as a joint holding and would ensure that your dear ones are not under financial burden for paying back the loans borrowed such as home loans, personal loans, vehicle loans, etc.

Hence, retirement planning is necessary as it provides financial security after retirement. The savings and investments made by you will secure the lives of your dependents and will also help you in leading a stress-free life post-retirement. Insurance plays an important role in retirement planning, and it would definitely be a wise decision to keep in mind about the various insurance options which can make your process of retirement planning easier and simpler.

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