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Understanding Annuity

Annunity is a type of contract between an individual and an insurance company.<br>https://www.sbilife.co.in/en/individual-life-insurance/pension/annuity-plus<br><br><br>

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Understanding Annuity

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  1. Understanding Annuity

  2. What is an Annuity? It is a type of contract between an individual and an insurance company. The individual makes investments and in return they get regular payouts. The investment can be in lumpsum or distributed. This is more of an insurance than an investment. It is commonly used for retirement planning. 

  3. Types of Annuities • Lumpsum Annuity – Offer a portion of the payout as lumpsum payment.  • Periodic Annuity - Provide payouts at regular intervals. • Deferred Annuity – Interval between the premium payment and payout. • Immediate Annuity – Payout can start immediately after the payment is made. • Fixed Annuity – Payouts remain constant throughout the tenure. • Variable Annuity – Payouts change according to market performance. 

  4. Benefits of Investing in Annuity Plans • With annuities, you can get a regular source of lifelong income.  • It also has an insurance feature, which provides guaranteed payment to the beneficiary, in case of your demise.  • It is highly flexible. You can get payouts at regular intervals or as a lumpsum. There is also the option for fixed payouts.  • They can be a great way to get income after retirement.

  5. How Does Annuity Work? Let's take the example of SBI Life Annuity. It is an individual, non-linked, immediate annuity product. Under this plan:  • Investor chooses the payment they wish to make or the payout. • Then they choose the benefits from the different annuity options available. • Payout frequency can be selected. • Payout will be submitted to the investor's bank account.

  6. Tips to Invest in Annuity • If you are looking for pension, choose plans where payout starts after retirement. • If you have low risk appetite, choose fixed annuities.  • If you want your spouse to get payments after your demise, choose joint life annuities.  • Do not withdraw your annuity before maturity. There can be an early withdrawal fee. 

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