LIC Annuity Plans

Life Insurance Corporation or LIC was established in the year 1956. In its 60 years of existence, the company has earned a very good reputation for providing various insurance plans and is still leading the market. At the starting of its establishment, LIC was the only provider of life insurance plans and it is still leading the market.

The company caters to various needs of its customers and thus it has the largest customer base in India. With different life insurance products, annuity or pension plans are one of the highest selling products of LIC. Let us understand the concept behind annuity plans and find out various plans offered by Life Insurance Corporation of India.

What is an Annuity Plan?

An annuity plan, as its name suggests, offers you a regular income for life after you invest a lump sum. What happens with an annuity plan is that your life insurance company invests your money and pays back the returns that are generated from it as pay-out when you get to retire. There are two types of annuity plans:

  • Differed Annuity Plans: The annuity plans that enable you to accumulate a corpus for your retirement over some time. You can invest in a different annuity plan while you are working. The accumulated corpus is the premium that you pay and you get it back when your annuity plan gets matured. Upon maturity, the accumulated corpus is paid as a lifelong income.
  • Immediate Annuity Plans: An immediate annuity plan, as its name suggests, is for those who want to get regular income as soon as they make the initial investment. Generally, an immediate annuity is for those who are approaching the age of retirement. In this way, a differed annuity plan accumulates the amount you pay whereas an immediate annuity pays the money back.

LIC Annuity Plans:

Life Insurance Corporation of India offers the following annuity plans:

LIC New Jeevan Nidhi Plan:

New Jeevan Nidhi Plan is LIC’s traditional differed insurance plan through which you become eligible to create your retirement corpus through the duration of policy by paying regular premiums. You get annuities as soon as this plan matures. The features of this plan are:

Features and Benefits:

  • It is a participating pension policy that allows this plan to participate in bonus declarations that are made by LIC.
  • Upon maturity of this annuity plan, the sum assured, vested bonuses, and the sum assured is paid as a benefit of maturity.
  • Guaranteed additions are as well added to the corpus that enhances the advantages payable under this plan.
  • The maturity benefits can as well be used to purchase an immediate annuity plan or single premium differed annuity plan.
  • Upon the death of the insured, the accrued sum assured is paid with guaranteed additions and vested bonuses.
  • You can as well commute 1/3rd part of the benefits of maturity and get it in cash.
  • The disability benefit and accidental death riders are provided as optional cover. You can opt for these riders by paying an extra premium and they promise to provide an additional sum assured when accidental death or disability occurs.
  • You get discounts on the premiums if you select to pay the premium half-yearly or annually. The discounts on these premiums are 1 percent and 2 percent respectively.
  • This policy allows both regular and single premium payment options.
  • Rebate on high sum assured is also provided if you choose the coverage of Rs. 3 lakhs and above.

Eligibility Criteria:

Entry Age

20 Years to 60 Years

Policy Term

5 Years to 35 Years

Sum Assured

Minimum – Rs.1 lakh

Maximum – No Limit

Monthly Pension Amount

Minimum – Rs. 1000

Maximum  - Rs. 10,000

Sample Premium Rate:

Mentioned below are sample premium rates that are applicable on this LIC annuity plan for a sum assured of Rs. 2lakh:

Entry Age

Regular Premium

Single-Premium

Term 10 Years

Term 20 Years

Term 30 Years

Term 10 Years

Term 20 Years

Term 30 Years

35 years

NA

Rs. 10,720

Rs. 6,960

NA

Rs. 1,22,400

Rs. 91,230

45 years

Rs. 23,050

Rs. 11,430

NA

Rs. 1,70510

Rs. 1,26,560

NA

Pradhan Mantri Vaya Vandana Yojana:

This annuity plan was launched by the Indian government to provide regular income to senior citizens. This scheme was made available till March 31st, 2020 and now it is being sold through LIC. Some of the benefits and features of this scheme are:

Features and Benefits:

  • You can purchase this scheme online through the website of LIC.
  • It is a saving for ten years in which pension is paid during the specified duration.
  • This scheme has no maximum entry age limit.
  • You can receive a pension half-yearly, yearly, monthly, or quarterly basis as per your requirement.
  • In case of death of the policyholder, the nominee gets the purchase price paid for this scheme.
  • If you require funds for critical or terminal illness, you can easily surrender this policy. Upon the surrender of this policy, 98% of the invested amount is refunded.
  • Upon maturity of the policy, you get the price of purchase along with the last installment of pension.
  • You can as well avail loan against the policy after completion of the first three years. You can avail of loans up to 75% of the price of purchase of the policy.

Eligibility Criteria:

Entry Age

60 Years and more

Policy Term

10 Years

Yearly Price to Purchase

Minimum – Rs.1,44,578

Maximum – Rs. 14,45,783

Monthly Pension Amount

Minimum – Rs. 1000

Maximum - Rs. 10,000

Sample Pension Rates:

Here are the sample rates of pension that you can avail of at various frequencies while paying a purchase price of Rs. 10lakhs:

Monthly Pension

Quarterly Pension

Half-Yearly Pension

Yearly Pension

Rs. 80,000

Rs. 80,500

Rs. 81,300

Rs. 83,000

LIC Jeevan Shanti Plan:

Jeevan Shanti is a flexible pension plan that allows you to get an annuity immediately after you purchase the policy and even after some years. This plan, therefore, provides you a choice between deferred or immediate annuity pay-outs. The benefits and features of this plan are as follows:

Features and Benefits:

  • You need to pay only a single premium to purchase this plan.
  • You can purchase this plan online from the website of LIC.
  • You are eligible to avail of a single life annuity for yourself only or can select a joint-life annuity option that can pay annuities to the spouse as well.
  • The plan offers ten annuity options. You can select an option according to your income requirements.
  • In the differed annuity option, guaranteed additions are included in the purchase price that enhances the amount of pension.
  • If the policyholder dies during the deferment period, the accrued guarantee add-ons with purchase price are paid. However, the death benefits would be a minimum of 110% of the purchase price.
  • The death benefits can easily be taken by the nominee in installments or lump sum. The nominee can as well opt for death benefits that can be received as annuity payments.
  • If the purchase price is high, a single premium is paid. You can also get an increase in the annuity that is payable.
  • There is as well an increase of approximately 2% in the rate of an annuity when you purchase a policy online.
  • The facility of loan against the policy is available under some specific options of the annuity.

Eligibility Criteria:

Age of Entry

30 years to 100 years

Purchase Price

Minimum – Rs. 1.5 lakh

Maximum – No limit

Pension Amount

Minimum

Yearly – Rs. 12,000

Half-Yearly – Rs. 6,000

Quarterly – Rs. 3,000

Monthly – Rs. 1,000

Deferment Period

One year to 20 years

Options for Annuity Payment:

The below-mentioned options for annuity payment are provided under this plan:

  • The annuity is payable for a lifetime.
  • The annuity is paid for a guaranteed period of five years and after that, it is paid for life.
  • The annuity is paid for a guaranteed period of ten years and after that, it is paid for life.
  • The annuity is paid for a guaranteed period of fifteen years and after that, it is paid for life.
  • The annuity is paid for a guaranteed period of twenty years and after that, it is paid for life.
  • The annuity is paid for life and the purchase price is returned on death.
  • The annuity is paid for life that increases at a rate of 3% every year.
  • A joint-life annuity is payable for the life of the primary policyholder. After the primary policyholder's death, 50% of the annuity is paid to the secondary policyholder till he/she lives.
  • A joint-life annuity is payable for the life of the primary policyholder. After the primary policyholder's death, 100% of the annuity is paid to the secondary policyholder till he/she lives.
  • A joint-life annuity is payable for the life of the primary policyholder. After the primary policyholder's death, 50% of the annuity is paid to the secondary policyholder till he/she lives. Upon the death of the second policyholder, the purchase price is refunded.

Sample Rates of Annuity:

Suppose, Mr. A, purchases LIC Jeevan Shanti plan by paying a purchase price of Rs. 10 lakhs. The different options for annual annuity rates that he can pay are mentioned below. For calculation purpose, the following details are assumed:

  • A has selected the immediate annuity option.
  • He has taken a joint-life annuity policy wherein the age of the second policyholder is 35 years.

Annuity Options

Amount of Annuity

Option I – Lifetime Annuity

Rs. 66,200

Option II – Lifetime Annuity Guaranteed for Five Years

Rs. 66,100

Option III – Lifetime Annuity Guaranteed for 10 years

Rs. 65,900

Option IV – Lifetime Annuity Guaranteed for 15 years

Rs. 65,500

Option V – Lifetime Annuity Guaranteed for 20 years

Rs. 65,000

Option VI – Lifetime Annuity Guaranteed with Purchase Price Return

Rs. 56,000

Option VII – Increasing Lifetime Annuity

Rs. 49,100

Option VIII – Joint Lifetime Annuity with 50% Annuity for the Secondary Annuitant

Rs. 62,900

Option IX - Joint Lifetime Annuity with 100% Annuity for the Secondary Annuitant

Rs. 59,900

Option X - Joint Lifetime Annuity with 100% Annuity for the Secondary Annuitant and Return of the Purchase Price

Rs. 55,500

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

How to Apply for LIC Annuity Plan?

As mentioned earlier, you can purchase LIC pension plans online from LIC’s website. Other than online, you can as well purchase a LIC plan from the agent of LIC or LIC's branch office. Alternatively, you can also compare various annuity plans online and thereafter can select the most suitable one.

Documents Needed to Apply for LIC Annuity Plans

To purchase a LIC annuity plan, you should provide the following documents:

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

How to Make a Claim under LIC Annuity Plan?

Differed annuity plans pay death benefits if the policyholder dies during the deferment period. For making a death claim, one has to take the following steps:

  • He/she should fill Form 3783, which is the death claim form. One has to fill part A of this form.
  • The death certificate issued by the Municipal Corporation has to be submitted.
  • The original documents of the policy are also required.
  • Some other documents such as post-mortem report, police FIR, panchnama, etc. can also be needed if the policyholder dies in an accident.

FAQs

  • Q1: What is pension’s commutation?

    Ans: When you opt for a differed annuity plan and it matures, then a part of the vesting benefit can also be commuted. Commutation of vesting benefit also means that withdrawal of 1/3rd part of the maturity benefit in a lump sum. This type of withdrawal is also called a pension commutation Under Section 10 (10A) of the IT Act, 1961 and is free of tax.
  • Q2: What are the exclusions of LIC Annuity Plans?

    Ans: Most of the LIC Annuity plans exclude suicide. If the policyholder commits suicide and dies within one year of policy purchase, 80% of the paid premium is refunded. If the policyholder commits suicide in one year of renewal of a lapsed policy, a higher of the available value of the surrender or 80% of the paid premium is given. However, there are no exclusions in the immediate annuity plan. In the case of suicide, 100% of the policy purchase price is refunded.
  • Q3: What is the meaning of vesting?

    Ans: Vesting means the maturity of the life insurance policy that you have purchased. Vesting is applied in case of differed annuity plans when there is a deferment period before paying any benefit. When the deferment period gets over, the insurance plan is said to vest.
  • Q4: What is the meaning of purchase price?

    Ans: The purchase price is the amount or premium of the policy that you pay to the insurance provider like LIC for purchasing an insurance plan.
  • Q5: Is annuity taxable?

    Ans: Yes, the annuities that get through a pension plan are considered as your income. So, they are added to your taxable income and are taxed as per the applicable income tax slab rate.
Written By: PolicyBazaar - Updated: 11 January 2021
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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