The rate of annuity that one receives is a function of the option that one chooses. It is the highest in the case of the annuity for life option.

A 40-year-old who chooses this mode of annuity would receive Rs 57.1 per thousand sum assured per year. If the person chooses annuity with return of purchase price option, the annuity received is Rs 46.60 per thousand sum assured per year.

Further, the annuity received also increases with higher age at entry. The annuity payments are based on life expectancy; as the age at entry increases, the tenure over which annuities have to be paid out may reduce.

Hence, a 60-year-old choosing the annuity for life option receives an annuity of Rs 77.8 per thousand sum assured per year.

Other features

A higher annuity is offered if the purchase price is in excess of Rs 1,50,000. The increase in the rate if annuity is higher if one opts for the monthly or quarterly mode of annuity receipt. No loans are granted against this plan; the plan does not acquire a surrender value either.

Suitability

Providing as it does for a steady revenue stream, such a plan could be considered by those approaching retirement or even by professionals who seek steady returns.

Of the annuity options, one would be better off with the annuity for life with the return of purchase price, as it would provide a sense of financial security to the beneficiary.

Pieces under this column seek to examine insurance products in detail. Readers are requested to compare products featured under this column with similar products offered by other players before arriving at an investment decision.

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