Features of Annuities

Annuities features are different from insurance. Under a contract of annuity, the annuitant agrees to pay a specific capital sum insured to the insurer. The insured has the option to pay the annuities in instalments. The amounts collected by the insurer are known as annuity funds and are invested for a certain expected return.

The insurer in turn agrees to make regular payments to the insured as long as the annuitant is alive. The benefits are calculated by the insurer based on the law of large numbers and the percentage of returns on capital. In the event that the annuity fund has more than the expected returns, the balance earnings is returned as bonus to the insured.

There are various types of annuities.

·      Single life annuity is payable until the death of the annuitant.

·     Joint life annuity pays during the life time of the annuitant or his spouse whichever is longer.

·    Revisionary annuity pays annuity till the death of the annuitant. After the annuitants death, 50% annuity is payable to the spouse until the spouse lives.

·    Annuity Certain pays definitely for a fixed number of years. After that it pays the annuitant only as long as he is alive.

Old and retired persons may not have a source of earning, may not have savings or even retirement benefits. Annuity has the advantage that it can cater to the needs of the old and retired persons. However, the limitation here is that annuities usually have an upper limit and therefore may not become a comprehensive source of earning. This has to be taken into consideration while planning for retirement.

Types of Insurance Products

Products that are offered for sale by General Insurers include various types of

1)Property Insurance

• Fire Insurance
• Marine Insurance - Ocean marine and Inland water Insurance
• Motor Insurance
• Other Miscellaneous Insurances

The coverage offered by Property Insurance include risks of
Fire,Windstorm, hail aircraft, vehicle damage, riot and civil commotion, explosion, smoke, vandalism, sprinkler leakage, water damage, sinkhole collapse,volcanic action earth movement and crime.

2) Casualty Insurances

• Auto liability
• General liability
• Workers Compensation
• Professional Liability
• Umbrella and Excess liability
• Package Policies
• Small accounts and Surety bonds

Coverage is offered for various types of liabilities to third parties of the Insured.
Legislation and court decisions require frequent changes to policy forms and underwriting guidelines.

Products offered by Life Insurers include:

1) Assurances: The coverage offered include benefit in the event of death besides other benefits It can be classified into two sub groups: Pure death benefit contracts also called Term Assurances and Endowment benefit contracts  which provide a death benefit if death takes place and a survival benefit during the period of contract which is also called Money Back Assurance.

2) Annuities: The product provides benefits on the event of survival at stipulated time intervals besides other benefits. It can be classified into two sub-groups: Deferred Annuity which provides an immediate annuity after a specified period called 'deferment period' and Immediate Annuity that provides a series of payments at a stipulated interval on survival.