What is an Annuity Plan and How Does Annuity Plan Works

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What is an Annuity Plan and How Does Annuity Plan Works | Kotak Life

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  • 16th Feb 2021
  • 2,034

What is an Annuity Plan and How Does Annuity Plan Works | Kotak Life

In a world full of uncertainties, an annuity plan is one of the most certain things you can rely upon. Different types of annuity plans are offered in India based on the needs of an individual. You must choose one which suits your financial needs perfectly.

What is an Annuity Plan?

In simple terms, an annuity plan is a chain of periodic payments which you receive time to time from a lump sum amount previously paid by you. Annuity payouts are a regular source of financial income.

For an individual, his/her other assets in life might deplete over a period of time for some reason or the other, but an annuity plan can offer the guarantee of assured income.

How Does It Work?

As said previously, there is a wide range of annuity plans which one can choose from based on his/her requirements. Each plan works differently. We would look at some common types and how they work below:

  • Life Annuity: In this annuity plan, you will receive regular payments (monthly/quarterly/yearly) over the course of your life.
  • Life Annuity with Return of Purchase Price:This plan is similar to Life Annuity where you shall receive regular payments throughout your life. However, after your demise, the insurance company will pay the initial investment (used to buy the annuity) to your nominee. You can consider this option if you want to pass on some finance down to your loved ones after your demise.
  • Guaranteed Annuity:With Guaranteed Annuity, you will receive regular income for a defined period of time (e.g. 5, 10 or 15 years). In case of your demise, your nominee will start receiving the same. Annuities will stop after completion of your guarantee period or demise of the annuity holder, whichever falls later.
  • Joint Life Annuity:With Joint Life Annuity, you can continue to enjoy the benefits of Annuity plan throughout your or your spouse’s lifetime.
  • Joint Life Annuity with Return of Purchase:Similar to Joint Life Annuity, with this plan, after the demise of you or your spouse, the nominee will receive the original investment amount used to buy the plan.

Why you need an Annuity Plan?

Here are a few reasons why an annuity plan is worth chasing:
1. Offers you fixed income for the rest of your life, which means financial freedom with the help of retirement annuity during your sunset days.
2. Flexibility to choose between monthly or yearly payouts.
3. Tax benefits based on current tax provisions.
4. Ability to withdraw money after being diagnosed with a critical illness.
5. Flexibility for premium payments for your annuity plans.

Annuity Plans with Kotak

Kotak Life offers an immediate annuity life insurance plan - the Kotak Lifetime Income Plan. The plan offers an assurance of lifetime income for the policyholder, along with guaranteed lifetime income for the spouse in case of policyholder’s death.

The top features of the plan include:

1. Assurance of financial independence in your post-retirement life.
2. A choice between 6 annuity options to match your specific requirements.
3. Flexible monthly, quarterly, half-yearly and yearly payout modes to suit your goals.

You can calculate your premium outflow with the Kotak Premium Calculator.

- A Consumer Education Initiative series by Kotak Life

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