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How to Use Life Insurance for Retirement Planning?

Updated On Jun 30, 2021

Besides acting as a financial safety net for your loved ones in an unfortunate event, some life insurance policies also provide a financial cushion during old age. Such policies help in income generation in the form of monthly pensions after the retirement of the life assured; therefore, ensuring that he/she does not have to depend on children, friends and relatives even for day-to-day expenses. Read on to know more about how you can meticulously use a life insurance policy for retirement planning as well. 

Factors To Consider While Buying a Life Insurance Policy For Retirement Planning

Here is the list of some key factors that should be considered before purchasing a life insurance policy for retirement planning. 

1. Age

Purchasing a life insurance policy at a young age helps get higher coverage at a lower premium rate. Moreover, the compounding benefits of the investment made at an early age help gain a higher amount, which will help maintain the current lifestyle even after retirement.

2. Savings

It is essential to calculate the average amount of money you will need to maintain your current lifestyle after retirement to help decide the retirement plan. You can estimate the amount after considering your personal and professional goals and future aspirations. 

3.  Inflation Rate

Another factor that should be considered while purchasing a life insurance policy for your retirement planning is the inflation rate. The money saved might not be enough for the long-term if you don’t consider the rate of inflation. 

Life Insurance Policy for Retirement Planning

Some life insurance policies which provide the provision of retirement planning are given below. 

1. Retirement Plan

Designed specially to cater to the retirement needs of the life assured, a retirement plan helps in income generation through monthly pensions in old age. The plan works in two phases - the accumulation phase and the annuity phase. The former includes the duration where the life assured pays the regular premium, an amount of which is invested in securities. The rising investments lead to increasing profit and capital. In contrast, the latter includes the pension payments through the mode and plan option selected at policy inception. 

2. Whole Life Insurance Plan

A whole life insurance policy offers lifetime coverage to the life assured, even if he/she lives up to 100 years. If the life assured dies within the policy term, the nominee is paid death benefits with an accumulated bonus. However, if the life assured survives till the policy ends, maturity benefits are provided to him/her. Moreover, the policy also has a provision of paying regular payouts to the life assured after the completion of the policy, which helps make him/her independent. 

3. Unit Linked Insurance Plan (ULIPs)

Under this, the twofold advantage of life coverage and investment option under one plan is offered. Some portion of the premium is invested in equity, bonds or debt, while the rest is kept for giving life coverage. The investment is made according to your long-term plans for retirement.

4. Endowment Plan

The dual benefits of a life cover and savings is provided to the life assured under the endowment policy plan. Under this, the life assured or beneficiary are provided with the maturity benefit after the completion of the policy duration. However, if the life assured dies, the beneficiary is provided with the sum assured along with some bonus calculated through the number of years the life assured lived within the policy tenure.


You can consider the policies mentioned above while purchasing a life insurance policy for your retirement planning. It is advisable to carefully compare all the policy plans offered by various insurance providers to make an informed financial decision. You can even consult your financial advisor or an insurance agent to help understand the terms and conditions. 

Also read - How Can Life Insurance Be an Effective Investment Tool?

How to Choose a Life Insurance Policy to Meet Your Needs?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.        

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