Annuity plans

Annuity plans guarantee lifelong income at monthly, quarterly or annual intervals, are a good fit for investors who value certainty over everything else.

Annuity plans are offered by the Life Insurance Corporation of India (LIC) and private sector life insurers, such as HDFC Life, ICICI Pru Life, SBI Life, Birla Sun Life and Reliance Life.

Immediate annuities are, at their root, a very simple product. You pay a ‘purchase price’ to the insurer in the form of a single premium. 

In return, the insurer pays you a guaranteed monthly, quarterly or annual income (the annuity) as long as you live. 

Most insurers offer five to six variations of this simple annuity product

When signing up for your plan, you can choose either lifelong annuity with or without return of purchase price

Apart from a fixed annuity, some insurers offer you the alternative of an increasing annuity, which rises by 3-5 per cent every year. 

The increase is not compounded and is calculated at simple rates. It is too small to really shield you against inflation

Investing ₹10 lakh in the 3 per cent increasing annuity from LIC for instance, will start you at a monthly income of about ₹6,000, which will rise by ₹180 every year. But while increasing annuity plans are intended to protect you from inflation 

A third choice you will have to make is between a single annuity and a joint/or survivor annuity. If you have dependents in your family, such as your spouse, you can opt for a joint or survivor plan, where the surviving member will continue to be paid lifelong annuity, on death of one member.