Life insurance is required to cover the risk associated with early death of a person. If you believe that this is the principle or theme of the life insurance companies then you are wrong. Risk is also associated with long living. Life insurance is also for them who have risk due to longevity. The number of old persons are increasing considerably in almost all countries. Old persons have no earnings to support their life and fulfill their demands with ease. Their main source of supporting is saving accumulated during their working days or support from their children or next generation. But in 90% cases the savings accumulated is inadequate to fund rest of their life. This situation is worse in case where person are not getting pensions/retirement benefits or if he is poor with on support from the next generation.
To fight such situation Annuity policies are designed. People contribute to annuity plans during their working days to get return as long as they live. The contribution of a large number of individuals are pooled and then each member is paid an annual or monthly amount. When a person purchases annuity contract he pays insurer/company a specified amount, may be in installments, to get a series of payment in return as long as he live. This is the basic principle of annuity contracts. In the market many type of annuity plans with different type and features are available. Annuity plans are becoming very famous day by day and they are in great demand by the people in today's scene. It is a great secure investments for the life. According to a survey, in developed countries the percentage of annuity policies sold to the total life insurance policies sold is as high as between 38-40%.
On the whole we can say that under a life insurance policy the insurer pays upon the death of insured but under an annuity plan the insurer/company pays till the death of the insured.
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