Annuity Insurance Overview:
An annuity is a pension product which aims to offer financial security to individuals in their old age through assured cash flow at regular intervals. Based on a sum of money invested by an individual in advance, the insurance providers will pay a regular annuity. Annuity Insurance offers cover against any financial risk that arises during your retirement/ old age. Risks such as income replacement, inflation and investment risk are covered under Annuities Insurance. There are different types of annuity plans to choose from, which are - Variable Annuity, Immediate Annuity, Fixed Annuity and Fixed Indexed Annuity plan.
Benefits of Annuity Insurance Policy:
- Avail annuity on a lifetime basis, with an increase in payout ranging between 3% - 5% per annum. This does not apply in the case of a fixed annuity plan.
- Capital refund – most insurance providers offer the option to get full or partial capital refund.
- You can choose the frequency of your annuity payment, i.e., on a yearly, half-yearly, quarterly or monthly basis.
- By paying a larger amount as premium, you can avail higher annuity as an incentive.
- You can get extensions to the policy in the form of riders such as the Accidental Death Benefit Rider, at an additional rate to the premium paid on the base policy.
- Two individuals can be insured under a single joint life annuity insurance policy.
Features of Annuity Insurance Plan:
Income Tax Exemption
The policy holder can avail an income tax exemption as stipulated under section 80CCC of the Income Tax Act, 1961. Up to 1/3rd of the policy proceeds can be commuted by the policy holder and is exempted from taxation. The sum assured upon death of the insured is not taxable.
Under the variable annuity plan, the policy holder can choose to invest based on the performance of the investment. The growth potential and risk can be analyzed in advance and investment can be made accordingly.
Immediate Annuity Insurance policies offer an assured pay out on a regular basis, once a lump sum amount is paid as premium. This income generating scheme offers access to funds with limited restrictions.
Fixed Annuity Insurance policies provides assured payouts on a fixed interest basis. The income earned as well as the principal amount invested are guaranteed throughout the policy term.
Fixed Indexed Annuity
The Fixed Indexed Annuity policy offers payout to the policyholders based on a specific equity-based index. Regardless of the index performance, the contract value will not fall below the minimum amount specified in the contract.
List of Companies Offering Annuity Insurance Policy:
SBI Life Insurance – SBI Life Annuity Plus
Individuals who are 40 years of age and above can avail an SBI Life Annuity Plus policy. The maximum age of entry is 80 years. This plan is a non-participating, non-linked annuity plan that is given out on an individual basis. By being insured under this policy, you can get lifetime pension. Payment of annuity is done on an annual, half-yearly, monthly or quarterly basis, as chosen by the policy holder. The minimum annuity paid out is Rs. 200 on a monthly basis, Rs. 600 on a quarterly basis, Rs. 1200 on a half-yearly basis and Rs. 2400 on a yearly basis.
ICICI Prudential Life Insurance – ICICI Pru Immediate Annuity
In order to purchase the – ICICI Pru Immediate Annuity policy, the minimum age of entry is 45 years and the maximum age of entry is 100 years. The spouse of the policy holder can also be included under a single policy and in order to do so the spouse should be at least 20 years old. Payment of annuity is done on an annual, half-yearly, monthly or quarterly basis, as chosen by the policy holder. ICICI Pru Immediate Annuity offers payout options such as life annuity, life annuity with return of purchase price (upon death of the beneficiary), Joint Life – last survivor without return of purchase price and Joint life- last survivor with return of purchase price.
HDFC Life Insurance – HDFC Life New Immediate Annuity Plan
HDFC Life New Immediate Annuity Plan offers annuity on a lifetime basis. The minimum age of entry is 30 years and the maximum age of entry is 85 years. The minimum annuity payout is Rs. 10,000 on a yearly basis, Rs. 5,000 on a half-yearly basis, Rs. 3,000 on a quarterly basis and Rs. 1000 on a monthly basis.
Life Insurance Corporation of India (LIC) – Jeevan Akshay VI
Life Insurance Corporation of India (LIC) – Jeevan Akshay VI Plan offers annuity on a lifetime basis, with an assured increase in rate at 3% per annum. The minimum age of entry is 30 years and the maximum age of entry is 85 years. It is mandatory to provide age proof in order to avail this policy. Life Insurance Corporation of India (LIC) – Jeevan Akshay VI Plan does not acquire any surrender value or paid-up value.
Birla Sun Life Insurance – Immediate Annuity Plan
The minimum age of entry for the Birla Sun Life Insurance – Immediate Annuity Plan is 30 years and the maximum age of entry is 90 years. Payment of annuity is done on an annual, half-yearly, monthly or quarterly basis, as chosen by the policy holder. There is no requirement for conducting a medical exam prior to availing this policy.
Annuity Insurance Policy FAQs(Frequently Asked Questions):
- How does the Annuity Insurance policy work?
By paying a sum of money on a one-time basis as premium, individuals falling within the age group of 40 – 100 years can avail an Annuity Insurance policy. The minimum and maximum age of entry varies among each insurance provider. This ensures that the insured is financially protected in old age as a specific amount is paid out as pension through this scheme. Payment of annuity is done on an annual, half-yearly, monthly or quarterly basis, as chosen by the policy holder. The rate at which the annuity is provided is assured throughout the policyholder's lifetime when he/she chooses an immediate annuity or fixed annuity plan.
- What are the different types of annuity insurance?
There are different types of annuity plans to choose from, which are - Variable Annuity, Immediate Annuity, Fixed Annuity and Fixed Indexed Annuity plan.
- Is the Fixed Indexed Annuity plan a stock market investment?
No, the Fixed Indexed Annuity plan does not participate in any equity/ stock investment.
- Is there a high risk involved while opting for the Fixed Indexed Annuity plan?
No, there is minimum risk involved while opting for the Fixed Indexed Annuity plan since it is based on an equity-based index and regardless of the index performance, the contract value will not fall below the minimum amount specified in the contract.
- When can I receive pay out on deferred annuities?
Deferred Annuities, unlike Immediate Annuities, can be withdrawn as and when the policy holder chooses to do so.