Accumulation Period
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Definition:
In a life insurance policy, the accumulation period is the time span in which the life insured pays a regular premium towards the insurance product. This helps in the accumulation of funds for life after retirement. This broadly applies to annuity or retirement plans.
Description:
In the accumulation period, the life insured builds up the cash value of the annuity via periodic investments as premium payments. The length of the accumulation period is defined at the inception of the policy. Based on the current age and retirement timeline, the annuitant has to choose an annuity plan with a suitable accumulation period. After the accumulation period is over, you can access the capital accumulated over the years.
Starting early with the annuity makes your accumulation period longer. It gives you higher payouts at the end of the accumulation period.
Example:
Mayank took a retirement plan when he was 35 years old. He wanted to receive a monthly income of Rs.40,000/- as an annuity after he turns 62 years. Mayank started to pay the premium up until he turned 60. The accumulation period for Mayank to receive annuity becomes 25 years (60 -35 years).
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