For those who have been paying more attention to health insurance, annuity insurance may seem a bit unfamiliar. Words related to the word “gold” always give people the illusion of being tall. Annuity insurance is also a form of life insurance, which has both wealth management attributes and certain guarantees. When you need to reserve a certain cash flow for a certain stage of life and solve problems such as education and pension, you must focus on the tool of annuity insurance.
However, some irresponsible and unprofessional insurance agents one-sidedly exaggerate the benefits of annuity insurance and mislead users to apply for insurance. It is recommended that you do not buy insurance impulsively. Before purchasing annuity insurance, you should first understand some basic knowledge of annuity insurance to prevent stepping on the pit.
What is annuity insurance?
Although annuity insurance is also insurance, it is different from common critical illness insurance, medical insurance, and life insurance. It is not the safety of life that is guaranteed, but the safety of money.
Let’s take a look at the official definition of annuity insurance:
Annuity insurance means that the insured or the insured pays insurance premiums at one time or regularly. The insurer pays the insurance money on an annual, semi-annual, quarterly, or monthly basis on the condition that the insured survives until the insured dies or the insurance contract expires.
To put it simply, it is to use today’s income surplus in exchange for future stable income.
Annuity insurance is not like a small investment, it is safer, more stable, and sustainable. Since the income is written into the insurance contract, the insurance company must draw a liability reserve following the law. Even if the insurance company goes out of business or goes bankrupt, the remaining insurance companies will still “take over” to share the annuity payment for the purchaser. Therefore, taking out annuity insurance is very safe and reliable.
However, compared with other financial management methods, the liquidity of annuity insurance is poor. Once planned, it is necessary to prepare for long-term investment.
Some people describe annuity insurance as a hen that lays eggs. It is fed once or regularly in the early stage. After the hen matures, it starts to lay eggs. This is the time when you start to get benefits. Eggs can be used to feed themselves (pensions), children (education funds), parents (birthday funds), or kept to hatch chicks (other investments).
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How much to invest, how many years to invest, when to receive, how much to receive, and how long to receive, the specific problems to be solved are different, and different annuity insurance products have evolved accordingly, such as education funds, pensions, birthday funds, marriage funds, entrepreneurial funds, etc.
Yes, these different names are the “vests” of annuity insurance. No matter how many names are changed, they are essentially buying insurance for your money. The content of the insurance depends on the type of annuity you purchase.
2. Types and characteristics of annuity insurance
The annuity insurance we usually come into contact with mainly includes ordinary annuity insurance, participating in annuity insurance, universal annuity insurance, and investment-linked insurance. The most common pension and education funds belong to the category of ordinary annuity insurance.
Ordinary annuity insurance
Policy benefit = insurance premium (payment) + guaranteed benefit (the money you will get)
The policy benefits of this type of annuity insurance are determined, and its predetermined interest rate level is also the highest among the several types of annuity insurance listed above, with the highest predetermined interest rate being 4.025%. Products with predetermined interest rates are gradually withdrawing from the stage of history.
Another feature of ordinary annuity insurance is that it pays fixed fees and is dedicated to special funds. The user and the insurance company have agreed on how much and how long to pay each year, and they must be executed regularly. It is suitable for the moonlight family and the chopping party to do wealth planning to ensure that the funds play a role at the agreed time or in emergencies.
Ordinary annuity insurance is divided into the following two types according to the period of insurance paid by the insurance company:
(1) Lifetime annuity insurance, also known as “pension annuity insurance”, is available until old age, such as the once-popular Xingyihe Zizai Life Pension Annuity Insurance.
(2) Regular annuity insurance, the payment node is a fixed period such as ten or twenty years, and the insurance benefits are received in batches in one or fixed years until the insurance period expires or the insured dies. The form of fixed annuity insurance is similar to that of life annuity insurance, and it is often used for specific purposes such as children’s education and investment preparation for children’s marriage. For example, iBaby Education Annuity Insurance, which is suitable for saving for children’s education, and Monopoly Annuity Insurance, which is suitable for making pension plans for yourself.
2. Participating in annuity insurance
Policy benefit = insurance premium (payment) + guaranteed benefit (the money you can get < ordinary type) + non-guaranteed benefit (dividend from the insurance company, the income is uncertain)
The predetermined interest rate and fixed income of this type of insurance are generally lower than ordinary annuity insurance, but the dividend function makes the income of this type of product “look beautiful”. However, the actual dividend depends on the capital operation level of the insurance company, so the dividend may be unstable or even zero.
3. Universal annuity insurance
Policy benefit = insurance premium (payment) + guaranteed benefit (guaranteed interest rate, the money you can get < ordinary type) + non-guaranteed benefit (universal account settlement interest rate, income is uncertain)
For universal insurance, after deducting part of the initial expenses and protection costs, the premium will enter the personal investment account, with a guaranteed minimum return (generally no more than 3%), and an uncertain “additional income”. At present, the Taiping Wealth Zhiying Annuity Insurance sold by Huize.com can be matched with the Glory Gold/Diamond Universal Account.
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4. Investment-linked insurance
Policy benefit = insurance premium (payment) + non-guaranteed benefit (investment income from different accounts, may lose money)
Investment-linked insurance is a long-term wealth management insurance that can be converted into an annuity for payment, but it is a product with great uncertainty. The investment-linked insurance access method is also more flexible, suitable for people with good wealth management habits and certain self-control.
If only considering the three aspects of income stability, liquidity, and safety, the above types of annuity insurance have their characteristics, which are summarized as follows:
Income stability: common type > dividend type/universal type > investment-linked type
Liquidity: all-purpose type/investment-linked type>ordinary type/dividend type
Safety: common type > dividend type/universal > continuous investment type
In general, the original intention of annuity insurance is to lock in long-term income and prevent longevity risks, so the safety of funds and the stability of income are the first and foremost. Ordinary annuities are the most stable and have the highest known fixed income.
However, we are often attracted by that part of the uncertain floating income, everyone remembers to keep their eyes open and don’t bring marketing gimmicks into the pit.
3. Who is suitable for buying annuity insurance?
Annuity insurance is not a product that applies to all households. Generally, there are the following four types of people who need to buy annuity insurance:
1. Young people with retirement plans.
Pension is not an issue that only the elderly will consider. On the contrary, pension annuities should be planned as early as possible. What kind of living standard and how much money you want to have after retirement can be calculated in advance. If you want a high-quality pension life, You have to start planning now.
2. Parents who make long-term plans for their children.
As a parent, the most worrying thing is that you are old but have no money to leave your children. Parents who have ideas will choose to buy annuity insurance for their children, education funds, marriage funds, entrepreneurial funds, no matter what kind of form, they are all good for their children. The premise of future expectations is to first pass on the child’s disease risk and make basic guarantees.
3. Those who are in good economic condition at present, but have a high risk of debt in the future.
Annuity insurance plays the role of asset isolation and asset preservation. For people with sufficient funds, multiple methods and multiple baskets are required. Annuity insurance is a low-risk wealth management method.
In addition to the above groups, young people who usually spend more non-essentially and want to cultivate good wealth management habits through insurance, financial management novice who are unwilling to take high risks but want to gain returns, and who do not have a stable income but want to gain a sense of security If you are a full-time wife, you can consider buying annuity insurance.
Finally, let me remind you that before planning annuity insurance, you must do the basic protection (accident + medical + critical illness + fixed life), and don’t put the cart before the horse.