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What is an annuity plan: how it works, it’s type & benefits

How is annuity plan and how it works
What are Annuity Plans?

With the rising costs of living, ever-increasing medical inflation and higher life expectancy, it has become imperative that you plan for the post-retirement life wisely and as far as India is concerned, there have been some glaring projections in an RBI report. It forecasts that over 50% of Indians above age 65 are seen depending on children instead of their own wealth even as far as 2031. If you don’t want to be labelled as an economic burden, you’d want to make provisions for your post-retirement income, and annuity plans are a great way to go about this.

Future Generali Immediate Annuity Plan is one such traditional non-participating plan where you get the benefit in the form of regular income throughout your life. You can start getting your annuity immediately after paying the premium depending upon the mode you choose.


What is an Annuity Plan?

An annuity policy, as the name suggests, helps you to get regular payment for life after making a lump sum investment. What actually happens is that the life insurance company invests your money and pays back the returns generated from it to you as payouts when you retire.

So if you are looking for guaranteed income in your sunset years, you’d opt for such a plan without a doubt.

Get the jargon right
  • Annuity is a regular payout received during the Policy Term.

  • Annuitant is the person on whose name the policy is issued i.e you.

  • Purchase Price is the amount of single premium paid under the policy.

Why you need this Plan?

Here is a round-up of a few reasons why an annuity plan is an option worth chasing:

  • The policy offers you a fixed income for the rest of your life, which means financial freedom for your sunset days.

  • You have the flexibility to choose a monthly or yearly payout mode.

  • You receive tax benefits as per the current tax provisions.

  • Some insurers offer a Free Look period, whereby the policyholder has a period of 15 days from the date of the receipt of the policy document to review the terms and conditions of the policy and where the policyholder disagrees to any of the terms and conditions, he/she has the option to cancel/withdraw and return the policy stating the reasons for his/her objection.

  • Option to choose between Life Annuity and Life Annuity with return of Purchase Price

Types of Annuity
  • Life Annuity: under this option Annuity payment continues as long as the annuitant is alive. The Annuity payment stops upon the unfortunate death of the annuitant. No benefit will be payable and the policy will terminate.

  • Life Annuity with return of Purchase Price: Under this alternative, annuity payment continues as long as the annuitant is alive. Upon the unfortunate death of the annuitant, the purchase price is paid to the nominee and the policy terminates.

A word on the nomination:

If the policyholder is also the life assured under the plan, he/she can nominate a person or persons under Section 39 of the Insurance Act, 1938, at any time during the policy term, to receive the policy benefits in the event of her/his death.

Reading the fine print

The minimum age at entry needs to be 40 years, while the maximum age can be 80 years. And while there is no limit on the maximum purchase price, a minimum price of Rs 30,000 is essential.

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This would factor in on the overall decision. For example, if you are buying the plan at a relatively younger age, then you’d opt for a deferred annuity plan because you would only need these payouts after a specified period of retirement. However, if you are buying at closer to your golden years, you will seek regular pension payments to begin immediately, and therefore buy an immediate annuity plan.

This policy, by the nature of how it works, cannot thus be surrendered or assigned, or be used to avail loan facility.

In order to lead a comfortable and financially independent life post-retirement, annuity plans might be your best bet. You can get assured regular income and get to celebrate the golden years of your life.

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