Here’s the Deal

Offered by life insurance companies, a life annuity is an annuity of a series of payments at fixed intervals, paid until the purchaser (or annuitant) is alive. It is a long-term investment that supposedly protects you from the risk of outliving your income. Through annuitisation, your purchase payments (investment made towards buying a plan/policy) are converted into periodic payments that can last for life.

Being a contractual financial product, an annuity is designed to accept funds from an individual and ensure that the investment grows and its periodical payments are made to the investor/policyholder through a stream of payments via a payment mode chosen by them.

The payment stream from the issuer (insurance company) to the annuitant has an unknown duration that principally ends after the demise of the annuitant. After death, the contract terminates and the balance remaining of the fund accumulated is forfeited unless there are other annuitants or beneficiaries in the contract.

Some life insurance companies offer critical illness benefit (covering anywhere between 6 and