Better LIC returns for online purchase

Life Insurance Corporation of India (LIC) has made available online its immediate annuity plan offering a 1% higher return for online purchases. An immediate annuity plans is one where the investor pays a lump sum upfront and receives a stream of regular income from the next month itself.

The product that LIC is offering online is Jeevan Akshay VI, which has seven annuity options to choose from. The options range from one where the buyer has a choice to receive annuity at a uniform rate for life, a limited period annuity, and annuity for life with return of purchase price on the death of the investor or annuity for life which will continue to the spouse after the death of the annuitant. The minimum investment for an online purchase is Rs 1,50,000.

Historically annuities have not been popular because returns have been lower than on long-term fixed deposits. For instance, although there have been 10% FD schemes, whole-life annuity rates have been lower at slightly above 9% for retirees. However, with people having experienced low-interest rate cycles where FD rates have fallen to 7-8%, increasing credit risk among bond issuers and rising life expectancy, insurers expect that annuities will gain in popularity.

 

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