Page 34 - Insurance Times October 2020

In case of the pension products sold by life insurance
companies, there are two types.
1. Immediate Annuity
2. Deferred Annuity

Immediate annuity plan is one where the customer invests
a particular amount of money and keeps on getting annuity
payments as per his choice like monthly, quarterly, half-
yearly or yearly. The biggest advantage of this immediate
annuity is that an individual can clearlyknow, without any
uncertainty as to what is the amount he or she is going to alive otherwise it stops. The point to be noted here is that
get as per the options exercised by them. Most of these even if the person dies after say 11 years, the nominee will
products offer the following options. continue to get the annuity for the next 9 years. However,
1.1. Pension as long as the person is alive with NO return the annuity payable varies on the guaranteed term chosen
of capital by the individual customer. As the guaranteed term
1.2. Pension as long as the person is alive with return of increases, the annuity payable will marginally decrease.
capital Higher the guaranteed term, lower the annuity.
1.3. Pension with a guaranteed term of 5/10/15/20 and life
thereafter In option 1.4 above, an individual can get pension as long
as he is alive and after his demise, his spouse can get as long
1.4. Pension for self, spouse and with return of capital as she is alive and after the demise of the spouse, the
1.5. Pension for self, spouse and NO return of capital. invested amount will be returned to the nominee or legal
heir. In case the spouse happens to die before the policy
In case of option 1.1 above, the annuity payment is given holder, then also the invested amount will be returned to
to the person as long as the person is alive. in case of death the nominee or legal heir. This is one of the best options.
no other payment will go to the family or nominee. Hence However, we find that the rate of return is lesser than that
the rate of annuity payable in this option will generally be of option 1.1. Here also, the rate of return is fixed for entire
the highest. This option is exercised by an individual who has term of payment and hence gives a guarantee of a certain
no one to nominate or who doesn't want to pass on the amount of money during their life time.
corpus after the demise. However, the individual keeps on
getting the highest rate of return as long as the individual In option 1.5 above, though it is similar to option 1.4, the
lives even if it is beyond 100 years. invested amount will not be returned to the nominee or
legal heir. In this case, the guaranteed return will be slightly
In option 1.2 above, an individual gets annuity till the time higher than the option 1.4. When all the children are settled
he is alive and after the demise of the individual, the and there are no liabilities, one can opt for this options as
nominee or legal heir will get back the full amount invested this givens higher return.
by the individual. For example, if a person has invested Rs.1
Crore at the age of 60 and he happens to die at the age of
110, he will get pre-defined pension till he is alive and after
his death the total amount of Rs.1 Crore is returned to the
nominee or legal heir.

In option 1.3 above, one can choose the guaranteed term
of getting the annuity depending on his requirement in
multiples of 5 years (normally) starting from 5 to 20
(maximum in most of the companies) and life thereafter. In
case a person chooses 20 years guaranteed pay and life
thereafter, he will get the annuity irrespective of the fact
that he is alive or not. At the end of 20 years, if he is still
alive, he will continue to get the annuity as long as he is
The Insurance Times, October 2020