All About Annuity

An annuity is a plan that helps you to get regular payment for life after making a lump sum investment. The life insurance company invests the money of the investor and pays back the returns generated from it.

What are the different types of annuities?

  1. Immediate annuity plans: There is no accumulation phase and the plan starts working right from the vesting phase. It is purchased with a lump sum and the annuity payment starts immediately either for a limited tenure or lifetime.
  2. Deferred annuity: These are the pension plans in which the annuity starts after a certain date. It can be further divided into the following:
    1. Accumulation phase- It is the phase when you start investing and accumulating cash and commences from the date when you first time pay premium.
    2. Vesting phase- It is the date from which you will start getting the policy benefits in the form of pension.

How different types of annuities work?

These are how various annuity plans work:

  1. Life annuity: You will get regular (monthly/quarterly/yearly) annuity payouts from the scheme till you are alive. The annuity stops after your death.
  2. Life annuity with return of purchase price: You will continue receiving annuity payments regularly until you die. After that, the insurer returns the initial amount, which was used to purchase the annuity, to your nominee. It is a good option for those who want to leave a legacy behind.
  3. Annuity payable for a guaranteed period: The annuity is to be paid for a guaranteed period, say 5, 10 or 15 years even if the annuity buyer dies. Annuity stops either on the death of the annuitant or completion of the guaranteed period, whichever is later.
  4. Inflation-indexed annuity: Every year, there will be a rise in the annuity payable at a certain rate, say 2% or 5%. Though it may not be linked to the actual inflation rate, the rationale is that it would take care of the increase in expenses to some extent.
  5. Joint life survivor annuity: It keeps paying till either you or your spouse is alive.
  6. Joint life annuity with return of purchase price: It keeps paying till you or your spouse is alive. In the case of the death of both, the nominee is entitled to get the initial invested amount.

✅ When can you withdraw money from an annuity?

Money can be withdrawn from an annuity under certain special conditions. Firstly, some annuity plans allow withdrawal if the policyholder is diagnosed with a specified critical illness. Secondly, some annuity options return whole or part of the original purchase to the nominee after the demise of the policyholder.

✅ Is there an age limit for annuities?

In case of ICICI Pru Immediate Annuity, the minimum age of somebody buying an individual annuity is 30 years. The maximum age for buying an annuity is 100 years.

✅ Are annuities good for senior citizens?

Yes, immediate annuities give financial independence to senior citizens. Annuities allow senior citizens to live life on their own terms with a regular stream of income throughout their life with options to match different needs. Senior citizens can pay once, and get guaranteed regular income for life.

✅ What happens to my annuity if I die?

The fate of the annuity after the policy holder’s demise depends on the choice exercised by the policyholder while buying the plan. In cases where there is life annuity, no annuity is paid out once the policyholder dies and the money stays with the insurance company. In the case of a joint life annuity, no money is paid after both the policy holder’s demise and the money stays with the insurance company. To know more about options available in ICICI Pru Immediate annuity click here.

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Unlike traditional products, Unit Linked insurance products are subject to market risk, which affect the Net Asset Values & the customer shall be responsible for his/her decision. The names of the Company, Product names or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns.UIN: 105L133V01
ADVT No - W/II/1050/2016-17