Many people are living longer and retiring earlier. Undoubtedly, you hope to retire younger and live longer. But have you set up your retirement in such a way that you will be able to finance your dreams? In this article, we take a look at longevity insurance and how you can use it to ensure that your retirement income pays out just as you imagined it.

As individuals continue to retire at earlier ages and live longer, they are faced with the challenge of financing a retirement period that is likely to span 20 to 30 years. Those who are concerned about the probability of outliving their assets should consider seeking investment solutions that will guarantee retirement income for their lifetime. To help individuals guarantee that they will not outlive their assets, insurance companies are offering longevity insurance, a new product that guarantees that you will not outlive your retirement funds.

This unit linked plan is safe and has a duel benefits of insurance and capital market returns, guaranteed maturity value the returns are totally tax free. If the market value of your benefits is higher you reap the benefits with peace of mind and whistle.

If you are an aggressive investor in equities, you could protect the downside risk in a bear market by investing a portion of your funds in the Kotak Safe Investment Plan II. What you are essentially doing is that while you enjoy equity returns, your money is protected from abysmal lows and market vagaries by way of a Guaranteed Maturity Value.

Who can avail of the Kotak Retirement Income plan?
How old do you have to be to avail of this plan?
Minimum age - 18 years
Maximum age - 60 years

For what term can you choose to pay the premiums?
5 yrs - 30 yrs

How old do you have to be to receive your annuity?
Minimum Age - 45 yrs
Maximum Age - 65 yrs

At what intervals can you pay the premium?
Quarterly
Half Yearly
Annually

"What are the advantages of this plan?"
You can choose to retire at any age between 45 yrs and 65 yrs.

On Retirement:
You may take a lump sum in cash of up to a third of your Basic Sum Assured or Accumulation Account*, whichever is higher; and the balance of the benefit you are eligible for will be used to buy an annuity of your choice.

Annuity Options:
You may buy an annuity either from Kotak Life Insurance (subject to the choice and rates available at that time)**, or from any other insurer.

Early Retirement Benefits:
You may opt to retire early, i.e. at any age before the normal retirement date (subject to the policy being in force for 3 years or your attaining a minimum age of 45 yrs, whichever is later). You can then secure benefits with your Accumulation Account, net of an early retirement charge of 5%.
If the early retirement is due to ill health, then you may retire before attaining the age of 45. You can then secure benefits with your full Accumulation Account.

Late Retirement Benefits:
You may opt to retire after the retirement date originally selected, and select a new retirement date (subject to a maximum of 65 years). No further premiums will be payable and the death benefit will be equal to the balance in Accumulation Account. (However, all riders will cease at the original retirement date).

You can make lump-sum injections into your policy at any time before retirement (such lump-sum injections during a year may not exceed 25% of the Basic Sum Assured). A Supplementary Accumulation Account will be created for this, and will be paid out in the same manner as other benefits.
You may exercise the option of paying premiums from the Supplementary Accumulation Account, created for "lump-sum injections", if the need arises.

For a "With Cover" plan, you have the facility of Automatic Cover Maintenance, which ensures that the cover remains in force even when you miss the premium payments. This facility is available after the first three years of the term.

You have the option of paying premiums in quarterly, half-yearly or yearly installments.
You have the facility of a 15-day free look period.

*Accumulation Account is your personal account in which the premiums that you pay are
deposited, the returns declared every year are added and risk and expense charges are deducted.

**For example you can currently avail of the Kotak Immediate Income Plan, which gives the option of Life Annuity with Return of Purchase Price. The annual annuity rate applicable for an immediate annuity purchased now is 6.11% of Purchase Price (before deduction of charges), for the age group 56 years to 65 years. This, however, will vary with prevailing market interest rates, but will be competitive

What value-adds can you opt for?
You may avail of the following value-adds for a nominal premium at the time of taking the policy, subject to the aggregate premium on the value-adds not exceeding 30% of the premium on the basic benefit.

Term/ Preferred Term Benefit:
In the event of death during the term of this benefit, the beneficiary would receive an additional Death Benefit amount, which is over and above the Sum Assured. The maximum amount of benefit you can avail of is equal to the Basic Sum Assured. Where the Term Benefit cover applied for is more than Rs.10 lakhs, better rates may apply, subject to meeting eligibility requirements.

Accidental Death Benefit:
In the event of death as a result of an accident during the term of this benefit, your beneficiary will receive an additional benefit, which is over and above the Basic Sum Assured. The maximum Accidental Death Benefit you can avail of is equal to the Basic Sum Assured (subject to a maximum of Rs. 10 lakhs).

Critical Illness Benefit:
In case of the first occurrence of a critical illness during the term of this benefit, the Critical Illness Benefit Sum Assured will be added to the Supplementary Accumulation Account. Once the addition is made to the Supplementary Accumulation Account , the Basic Sum Assured would reduce by the Critical Illness Benefit Sum Assured, the Basic Accumulation Account would reduce in the same proportion and future premiums for the plan would be recalculated based on the reduced Sum Assured. . The maximum Critical Illness Benefit Sum Assured you can avail of is equal to the Basic Sum Assured (subject to a limit of Rs.20 lakhs).

(Please contact our Life Advisor for a list of Critical Illnesses)

Permanent Disability Benefit:
If you meet with an accident during the term of this benefit, and are permanently disabled, you would be entitled to an additional amount, which is over and above the Basic Sum Assured. This amount will be added to the Supplementary Accumulation Account and will be available on retirement. The maximum benefit available under this plan is equal to the Basic Sum Assured (subject to a maximum of Rs.10 lakhs).

Permanent Disability is defined as permanent and immediate inability to work
or permanent loss of use of two limbs or total and permanent loss of sight.

Life Guardian Benefit:
In case of the unfortunate death of the proposer, this benefit keeps the policy alive by waiving all future premiums on the policy. This is available only where the proposer and the life insured are two different individuals.

Accidental Disability Guardian Benefit: In case the proposer is permanently disabled as a result of an accident, this benefit keeps the policy alive by waiving all future premiums on the policy. This is available only when the proposer and the life insured are two different individuals.

**Are available as value adds only on "With Cover" plan

What are the Tax Benefits on this Plan?
Section 80C, 10(10D) of Income Tax Act would apply. Premiums paid for Critical Illness Benefit qualify for benefits under Section 80D. These benefits are as per the currently prevailing tax regulations and you are advised to consult your tax advisor for details.

*Please consult your tax advisor for details.

What happens in the event of the death of the life insured before retirement?
For the "With Cover" Plan:
The benefits to the beneficiary will be, greater of:
(i) Sum Assured less all the premiums due but not paid, and
(ii) Accumulation Account.

This is used to buy an annuity, and provide commutation benefit, in accordance with the beneficiary's choice.

For the "Without Cover" Plan:
The benefits to the beneficiary will be, greater of:
(i) Return of premiums (without interest), and
(ii) Accumulation Account.
This will be used to buy an annuity, and provide commutation benefit, in accordance with the beneficiary's choice.

How does the Kotak Retirement Income Plan work?
Mr. Mehta is a 35-year-old man, who wishes to retire at age 60. He takes the Kotak Retirement Income Plan with a Basic Sum Assured of Rs. 3 lakhs. He considers the following two options; "With Cover" - Option A, and "Without Cover" - Option B.

Option A Option B
Kotak Retirement Income Plan premium Rs 9,750 Rs 9,060

Term Benefit premium (3 lakhs of cover) Rs 1,818

Accidental Death Benefit premium (3 lakhs of cover) Rs 265

Total Annual Premium Paid Rs 11,568 Rs 9,325

(a)What is the benefit available to Mr.Mehta on retirement?

Under Option A,
Assuming that Mr. Mehta's Accumulation Account grows at 6% p.a, the fund available to him will be Rs. 4,67,500. Assuming that it grows at 10%, then the fund available to him will be Rs. 8,70,000.
Mr. Mehta may commute upto a third in cash immediately, and buy an annuity with the remaining benefit.

Under Option B,
Assuming that Mr. Mehta's Accumulation Account grows at 6% p.a, the fund available to him will be Rs.4,63,000. Assuming that it grows at 10%, then the fund available to him will be Rs. 8,56,600.
Mr. Mehta may commute upto a third in cash immediately, and buy an annuity with the remaining benefit.

(b) What is the benefit available in the event of the unfortunate death of Mr. Mehta after 15 years?

Under Option A,
Mr. Mehta's beneficiary will be eligible for the greater of Rs. 3 lakhs or the balance in the Accumulation Account. The balance in the Accumulation Account will be less than Rs. 3 lakhs even if the accumulation account grows at 10% per annum. He/she will also receive an additional Rs.3 lakhs under the "Term Benefit" as Mr. Mehta availed of this value-add by paying a nominal premium of Rs.1,818 p.a, for it. The beneficiary may commute upto a third in cash immediately, and buy an annuity from the remaining benefit.

Under Option B,
Mr. Mehta's beneficiary will be eligible for Rs. 1,95,400 if his Accumulation Account grows at 6% per annum, and Rs. 2,75,600 if his Accumulation Account grows at 10% per annum. In the event that Mr. Mehta's death has been due to an accident, then his beneficiary will receive an additional Rs.3 lakhs under the "Accidental Death Benefit", as Mr. Mehta availed of this value-add by paying a minimal premium of Rs.265 p.a. for it. The beneficiary may commute upto a third in cash immediately, and buy an annuity with the remaining benefit.

In the illustration, some benefits are guaranteed and some are variable. Guaranteed Returns are marked "guaranteed" in the illustration. Variable returns are shown at two different rates of assumed future returns. These assumed rates of return are not guaranteed and they are not the upper or lower limits of what you might get back .The actual return may be different depending on a number of factors including future investment performance.

General Exclusion.
In case the life insured commits suicide within 1 (one) year of the plan, no benefits outlined in the plan would be payable.

Exclusions for Accidental Death Benefit and Permanent Disability Benefit, Kotak Accidental Disability Guardian Benefit:

The Accidental Death Benefit, Permanent Disability Benefit, Critical Illness Benefit & Kotak Accidental Disability Guardian Benefit would not be paid out in the following circumstances:
(a) Self inflicted injuries, suicide, insanity, immorality, committing any breach of law or being under the influence of drugs, liquor etc.

(b) When the life insured is engaged in aviation or aeronautics other than as a passenger on a licensed commercial aircraft operating on a scheduled route
.
(c) Due to injuries from war (whether war is declared or not), invasion, hunting, mountaineering, motor racing of any kind, other dangerous hobbies or activities, or having been on duty in military, para-military, security or police organization.

Additional Exclusions for Critical Illness

(a) Unreasonable failure to seek or follow medical advice.
(b) Any pre-existing medical condition not disclosed at inception.
(c)Infection with Human Immunodeficiency Virus (HIV) or condition due to Acquired Immune Deficiency Syndrome (AIDS).
In addition, no benefit would be paid in respect of the exclusions specific to each critical illness.

Prohibition of Rebates
Section 41 of the Insurance Act, 1938 states:

(1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer
.
(2) Any person making default in complying with the provision of this section shall be punishable with fine, which may extend to five hundred rupees.