Insurance Uncovered

I am a 61-year-old retired NRI and want to have an insurance-cum-annuity plan. I have zeroed in on the LIC Jeevan Shanti policy with the deferred payment option.

Since I am getting a good rate of interest, I want to take a policy for ₹50 lakh with a four-year deferred annuity payment option, which works out to 8.69 per cent and a lifetime monthly pension of ₹34,170.

Kindly advice on other options in the market. I already have more than ₹50 lakh in bank deposits and around ₹50 lakh in shares and mutual funds.

Chandra

LIC’s annuity rate is among the best in town. As you have spread your investments already between bank FDs, MFs and stocks, you can go ahead with investing in Jeevan Shanti.

Here, the annuity rate is guaranteed by the insurer through your life time. If you want the annuity to go to your spouse after your life time, you need to enrol him/her in the same policy as secondary annuitant and take a joint life policy.

Otherwise, after your life time, the pension will stop, the sum assured will be given to him/her and the policy will be terminated.

The sum assured will be the higher of the two: purchase price plus accrued guaranteed additions minus total annuity payments made, or 110 per cent of the purchase price. Guaranteed additions accrue every month during the deferment period. It is calculated as purchase price multiplied by annuity rate per annum payable monthly divided by 12.

There are, however, a few things that you need to keep in mind here. First, in the deferment period, you will be receiving no income from the policy.

So think twice if you want to defer the annuity by four years. An immediate annuity will mean a lower IRR, but you will have some regular income start from the very next year. Second, the annuity you will receive is taxable at the slab rate.

The LIC annuity calculator shows a monthly pension of ₹36,400 for a purchase price of ₹50 lakh. So do check with your agent and confirm the annuity amount before you sign up for the policy.

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