Everyone aspires to stop working at any time and enjoy old age. However, the decision to stop working and revenue loss remains a major step. Many people do not just want to maintain a lifestyle in which they are accustomed, but also do other things that they can not do because of time constraints and busy work.
According to Central Bureau of Statistics, the average life expectancy (life span) Indonesian men 66 years and women 70 years. Each person must accumulate enough assets to be utilized until the end of his life if he wanted to retire at age 55. However, increasingly sophisticated technology we have to anticipate the resulting health risks where our investment is not sufficient. Longer life expectancy will increase with improved health facilities from time to time.
Annuity insurance can be called a "reverse" because it works the opposite way with the insurance system. When you buy insurance, you are required to pay the premium and the insurance company will (certainty) to pay UP (sum assured) at the time of your death to his beneficiary (recipient UP).
When you buy an annuity, you pay a premium or a value and in return you will receive income every month as long as you live. That way, you can conclude that the insurers to maintain financial stability if you die too early and keep your annuity from the financial damage caused by living too long.
Annuity Concepts
Annuity is a type of investment vehicle that is used as a source of extra income for retirees. Annuities are the only financial instrument that offers guaranteed income for life.
Annuities make periodic payments within a certain period of a lifetime. The basic functions of the annuity is to provide protection against economic hardship because someone lived longer than his personal financial resources. Period when the premiums paid to purchase the annuity is known as the accumulation of the period and the period in which the annuity payments made known as the period of distribution.
In terms of pure life annuity, life insurance companies will guarantee the payment of regular monthly benefits to participants annuity (the annuitant) for the rest of his life. If a benefit payment made to a particular period, but only during the life annuity participants, such a contract is known as temporary life annuity.
Annuity benefits consist of three parts, namely capital, interest and benefit to heirs. Capital was formed from the payment of the premium paid in the period of accumulation of the participants.
Flowers are the results obtained from the funds derived from funds paid when the fund matures and the benefit of the heirs are refunded to participants prior to his death. These benefits will be available for group annuity heirs.
Life insurance companies make a product structure is based on Mortality table and the estimated return on investment. From this information, they can calculate annuities for certain age groups, the number of guaranteed monthly payments that they can do for each participant without eroding earlier funds that have accumulated annuity group.
In the annuity principle, the law permits the implementation of the average lifetime income guarantee for each participant's annuity. Some people will live to age 65, which we consider to be the size of the national average. The other half will live beyond this figure while the other will die early.
Generally there are three types of annuities offered by insurance companies, each of which can be an alternative choice according to what you and your partner want.
Married Life (Living Single)
Payment or distribution of the benefits of income every month made during a person's life and ends upon death
Joint Life (Double Life)
Payment or distribution of the benefits of income every month made during a person's life, then after death, the payment forwarded to the wife / husband (who live longer) by X% (60% - 100%) received from the husband / wife
Term Annuity (Time Limited)
Payment or distribution of the benefits of income every month performed until a predetermined time limit.
Annuity Product Classification
Annuities can be classified in several ways because of differing perceptions regarding the start date of benefits applies, how the premiums are paid, how the annuity funds are invested, surrender benefits and methods used in calculating benefits. Some common ways of classifying annuities, including the following:
Single premium annuity, premium vs. regular. There are two ways of annuity payments and payment methods can be used as a classification of this investment tool. Annuities can be purchased with a single premium immediate annuity begins where or by regular premium for several years in which the annuity will start at a later date (postponed).
Immediate vs. deferred annuities. Participants have the option to receive annuity benefits at this time (immediately) or several years later (delayed). Immediate annuity is purchased with a single premium benefits within one interval after the date of purchase. While deferred annuities, there is a waiting period of several years between the date of purchase and payment of annuity benefits. Deferred annuity can be purchased with a single premium or regular. Annuity contract is very flexible and can be issued with a choice of single or regular premium payment and receipt of annuity benefits accordingly.
Fixed vs. variable annuities. If you invest in annuities, funds collected are invested on your behalf by the insurance company. From time to time you pay the premiums until the time benefits are paid back to you as an annual benefit or the benefit of one-time (lump sum), the investment will provide investment results.
Results of investment depends on the type of annuity investments made. Annuity with a fixed rate, principal capital is safe and the insurance company agrees to pay a fixed interest with a minimum level during the contract lasts. Investment results may be slightly higher than the level of investment in the market. Annuity products of this type have a low risk so that appropriate for investors who are cautious, conservative and want a steady cash flow.
In the annuity varies, premiums collected are invested in a portfolio consisting of stocks, bonds or other investment vehicle. Annuity payments vary depending on market situation and the good level of interest or of principal is not guaranteed.
The idea is to provide opportunity for participants to be able to follow the annuity rate of inflation through a portfolio of assets since the results can still lose purchasing power. However, the potential for higher investment returns also means that participants exposed to the annuity the higher risk level as well.
Annuity could vary during the period of accumulation of and become fixed during the benefit payment period or vary in these two periods. Variable annuities are not common in Singapore even though the annuity is widely accepted in the United States. It is hoped that these annuities will become more popular along with the demographic changes expected to occur in Singapore.
Annuity vs. pure certainty. Annuities can also be classified according to the insurance company's obligation to policyholders. Pure annuity benefit payments to participants a lifetime annuity the participant, regardless of the length of the short time period.
Annuities are considered liquid in full at the time the annuity participants died without any connection with the estate of participants annuity. Conversely, an annuity can have features of return (refund). This instrument was developed because of the objections to the penalty on the portion of principal that is not used if the participant died too early. Therefore, even a pure soul annuity provides the maximum income per dollar of principal amount, annuities are not popular.
Insurance companies use the feature returns to make annuities more attractive to potential policyholders. One of the most common variation is the amount of annuity with guaranteed payments.
Guarantee period can vary even for a definite period of the product for 15 years, meaning that insurance companies will begin to pay benefits for 15 years regardless of the participant's death an annuity, is a common choice being offered. Unpaid balances will be submitted to the estate of participants annuity.
Individual vs. group annuities.
Annuities can be offered either to individuals or groups. The basic principle is the same anuitasnya function. Group annuity can be the basis of the pension plan sponsored by a company or other organization.
Well, if it can be inferred from a brief description of the annuity program, this program actually provides certainty of income when you retire because of the income distribution will be made monthly until you die.
So in this case you avoid the possibility of losing or running out of income during your retirement until death. Hopefully this brief review add your insights about financial products that could be an alternative choice for families.