LIC Annuity Plans

The Life Insurance Corporation of India (LIC) provides a plethora of insurance and investment options to both its domestic audience and Non-Resident Indians (NRIs).

Annuity plans hold a special place among the diverse offerings of LIC. Essentially, annuity plans are financial products that provide a steady income stream (usually post-retirement). These plans can ensure one’s financial security and independence in the golden years of life. LIC, with its reputation for trust and reliability, offers various top-notch annuity plans.

This article delves deeper into the fundamentals of the annuity plans of LIC, elaborating on their distinct features and other crucial parameters to guide potential policyholders in their journey of financial planning.

Annuity Plans – An Overview

An annuity plan serves as a financial cushion that promises a consistent stream of income, predominantly post-retirement, in exchange for a lump-sum investment. The fundamental principle behind these plans is the strategic investment of your money by the life insurance company.

Over time, as this investment bears fruit, the returns are channelled back to you to facilitate a seamless transition into the retirement phase with financial assurance.

There are two primary types of annuity plans -

• Deferred Annuity Plans: These plans are akin to a savings mechanism for your retirement. When you opt for a deferred annuity plan, you pay premiums over a set duration, effectively building a retirement corpus. This accumulated sum is then returned to you in the form of a consistent lifetime income upon the plan’s maturity.
• Immediate Annuity Plans: Tailored for those on the cusp of retirement, an immediate annuity plan starts disbursing periodic incomes almost instantly after the initial lump-sum investment. It's an ideal choice for those who didn’t have the luxury of time or foresight to invest early but still seek regular payout in their retirement years.

Example: Consider Mr. Sharma, a diligent saver, who started investing in a deferred annuity plan at the age of 30. He regularly contributed premiums until he turned 60. At 60, his plan matured, and he began receiving regular payouts from the amassed corpus.

On the other hand, Mr. Verma, at 58, realised that he hadn't planned for a regular retirement income. He then chose an immediate annuity plan, investing a significant amount, and soon after started receiving regular payout, almost aligning with Mr. Sharma's deferred plan returns.

Benefits of Annuity Plans of LIC

Some of the key advantages of annuity plans of LIC are listed below -

• Guaranteed Lifelong Income: An annuity plan ensures that the policyholder receives a steady flow of income throughout their life, mitigating the risk of outliving one's savings.
• Flexibility in Payouts: Depending on the chosen plan, payouts can be made on a monthly, quarterly, half-yearly, or annual basis, suiting individual financial requirements.
• Tax Advantages: Certain annuity plans may offer tax benefits, reducing the taxable income and enhancing the net return.
• Protection Against Market Volatility: The returns from annuity plans are generally fixed or have minimum guaranteed returns, which protects your investment from market fluctuations.
• Peace of Mind: Knowing that there's a guaranteed income stream in place, especially post-retirement, offers profound peace of mind and financial security.

What are the Annuity Plans of LIC?

The Life Insurance Corporation of India (LIC) offers a variety of annuity plans tailored to meet different retirement needs. These plans not only provide financial protection after retirement but also come with an array of beneficial features.

Let’s take a look at the specifics of some of the renowned annuity plans of LIC -

LIC New Jeevan Nidhi Plan

An embodiment of LIC’s commitment to traditional pension plans, the New Jeevan Nidhi Plan lets policyholders build their retirement corpus through regular premium payments and receive annuities upon maturity.

Features and Benefits

• Participating Policy Design: This plan participates in LIC’s bonus declarations, which enhances its overall value.
• Maturity Benefits: Upon maturity, beneficiaries receive the sum assured along with vested bonuses and other applicable benefits.
• Guaranteed Additions: These additions further amplify the benefits and make the plan even more rewarding.
• Versatile Usage of Maturity Benefits: One can opt for an immediate annuity plan or a single premium deferred annuity with these benefits.
• Death Benefits: The nominee receives the sum assured, guaranteed additions, and vested bonuses in the unfortunate event of the insured's demise.
• Flexible Payout Option: Up to 1/3rd of the maturity benefits can be cashed out.
• Additional Cover Options: Accidental death and disability riders can be availed by paying an extra premium.
• Premium Payment Discounts: Opting for half-yearly or yearly premium payments can fetch discounts of 1% and 2%, respectively.
• Flexible Premium Payment: You can enjoy great flexibility with respect to premium payment as you can choose between regular and single premium modes.
• High Sum Assured Rebate: Avail rebates on the sum assured of INR 3 lakhs and above.

Pradhan Mantri Vaya Vandana Yojana

Originally a part of the government's initiative to support senior citizens, this plan is currently managed by LIC and assures regular income to the elderly.

Features and Benefits

• Online Purchase: The scheme is readily available for online purchase through the LIC website.
• Fixed Tenure: This is a 10-year savings scheme guaranteeing pension throughout its duration.
• No Age Bar: You can purchase the plan irrespective of your age.
• Flexible Pension Payouts: Opt for monthly, quarterly, half-yearly, or yearly pension disbursements.
• Nominee Benefits: In the event of the policyholder's death, the nominee receives the initial purchase price.
• Surrender Benefits: For urgent requirements arising from critical illnesses, one can surrender the policy to get back 98% of the invested sum.
• Maturity Benefits: The purchase price, along with the last pension instalment, is paid upon policy maturity.
• Loan Facilities: After the initial 3 years, you can avail of a loan of up to 75% of the policy's purchase price.

LIC Jeevan Shanti Plan

The Jeevan Shanti Plan stands out due to its flexibility. It offers immediate or deferred annuity options as per the policyholder's choice.

Features and Benefits

• One-Time Premium: Secure your future with a single premium payment.
• Digital Accessibility: This plan is available for online purchase through the official LIC portal.
• Dual Annuity Options: Choose between a single-life annuity or a joint-life annuity with provisions for a spouse.
• Variety of Annuity Choices: 10 distinct annuity options are available to cater to different income requirements.
• Guaranteed Additions: In the deferred annuity option, the purchase price is bolstered with guaranteed add-ons.
• Death Benefits: In case of the policyholder’s demise during the deferment period, beneficiaries receive a minimum of 110% of the purchase price along with guaranteed add-ons.
• Flexible Death Benefits: The nominee can take benefits as a lump sum, in instalments, or as annuity payments.
• Premium Incentives: Higher purchase prices offer enhanced annuities.
• Online Purchase Incentive: For online purchases, you can get around a 2% increase in the annuity rate.
• Loan Provisions: Under specific annuity options, the plan provides a loan facility.

Eligibility Criteria for Annuity Plans of LIC

Check out the comprehensive table below for the eligibility criteria of the 3 LIC annuity plans -

Documents Required for LIC Annuity Plan

Before seeking to invest in an LIC annuity plan, it's essential to have all the necessary documentation in place to ensure a smooth and hassle-free application process.

Here is a checklist of documents that prospective policyholders need to furnish -

• Income proof
• Photographs
• Age proof
• Identity proof
• Bank details
• Proposal form
• Address proof

Annuity Plans Payment Options

Annuity plans come with a variety of payment options tailored to meet the financial goals and requirements of the policyholders. Here's a breakdown of the annuity payment choices offered -

• Lifetime Annuity: Payments continue throughout the lifetime of the annuitant.
• Guaranteed Period Annuity (5 Years + Lifetime): Annuities are paid for a predetermined span of 5 years, irrespective of survival, and continue for the lifetime thereafter.
• Guaranteed Period Annuity (10 Years + Lifetime): After a guaranteed payout for 10 years, the annuity continues for the annuitant's remaining lifespan.
• Guaranteed Period Annuity (15 Years + Lifetime): Initial payouts, spanning 15 years, are followed by lifelong annuity payments.
• Guaranteed Period Annuity (20 Years + Lifetime): The annuitant first receives payments for 20 years and then lifelong ones, which ensures income in their sunset years.
• Return of Purchase Price: The annuity is received throughout life — upon the annuitant's demise, the initial purchase price is returned.
• Increasing Annuity: Annuities are disbursed for life, with an annual increment of 3%, catering to rising living costs.
• Joint-life Annuity (50% to Secondary): While the primary policyholder is alive, they receive a full annuity. Upon their passing, the secondary annuitant gets 50% of the annuity for life.
• Joint-life Annuity (100% Continuation): The primary policyholder enjoys the annuity for life. Post their demise, the secondary annuitant receives the same annuity amount until their own death.
• Joint-life with Return of Purchase Price: While the primary annuitant is alive, they enjoy the full benefits. After their death, 50% of the annuity is passed on to the secondary annuitant. If the secondary annuitant passes away, the initial purchase price is returned.

Claim Process for Annuity Plans of LIC

In the unfortunate event of the death of a policyholder, beneficiaries or nominees must be well-informed about the claim process to ensure that they receive the entitled benefits without undue delay.

Specifically, for deferred annuity plans, where death benefits are due if the policyholder dies during the deferment period, the following procedure must be adhered to -

• Filling the Claim Form: The nominee or claimant should complete Form 3783, commonly referred to as the death claim form. Keep in mind that only Part A of this form has to be filled out to initiate the claim process.
• Submission of Death Certificate: A vital document in this process is the death certificate. This must be procured from the local Municipal Corporation and submitted to LIC as proof of the policyholder's demise.
• Original Policy Documents: Alongside other essential documents, the original annuity policy documents must be furnished. These documents serve as a direct reference to the contract between LIC and the policyholder, outlining the benefits and terms.
• Additional Documents in Case of Accidental Death: If the policyholder's death occurred due to an accident, further documentation would be required. This may include:
  • Post-mortem report: A detailed examination report after the death
  • Police FIR: The First Information Report filed at the local police station
  • Panchnama: A legal document that records on-the-spot details of the accident

It's essential to be meticulous in this process, ensure all necessary documentation is in place, and provide all information accurately. Doing so will expedite the claim process and help beneficiaries receive the benefits in a timely manner.

To Conclude

LIC annuity plans stand as a testament to its commitment to providing long-term financial security to its policyholders. These plans, tailored to address diverse retirement needs, come with structured payment options and a simple claim process.

From ensuring a consistent post-retirement income stream to offering peace of mind in the face of uncertainty, LIC offerings continue to be a beacon of trust in the Indian insurance landscape. Whether you're approaching retirement or planning for the future, understanding and investing in an LIC annuity plan can be a prudent step towards a financially stable tomorrow.