Difference Between Immediate Annuity & Deferred Annuity in Insurance

What is an Annuity in Insurance?

What is the Difference Between Immediate Annuity and Deferred Annuity?

Here are the major points of difference between Immediate Annuity and Deferred Annuity: 

Point of Difference

Immediate Annuity

Deferred Annuity

Commencement of Payout

Annuity payout starts immediately or within 12 months.

Annuity payout starts at a later predetermined age, called the vesting age, after a deferment period.

Suitability

Suitable for those seeking immediate income payouts like those nearing their retirement.

Suitable for young investors who have a deferment period in hand and need to plan their future income needs.

Premium payments

Premium payments are, in most cases, lumpsum payments.

Premium payments are made mostly as instalments during the premium payment term.

Investment Growth

Usually, there is no investment growth since there is not much growth period, and payouts start almost immediately.

Allows potential for corpus growth, and hence, higher returns owing to the deferment period.

What are the Tax Implications of an Annuity Plan?

Which One Should You Choose for Your Retirement?

Frequently Asked Questions

Can You Change Payment Terms with Deferred Annuities?

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Deferred annuities offer more flexibility, allowing for adjustments during the deferral period to accommodate changing financial circumstances.

Do Immediate Annuities Offer Investment Growth?

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No, immediate annuities do not have a growth period; payouts are fixed and do not benefit from potential investment gains.

Can I Choose the Start Date of the Deferred Annuity Payouts?

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Yes. You can choose the deferment period and the vesting age in your deferred annuity insurance. Thus, you can decide when you want to start receiving your annuity income.

Disclaimer

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  • This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
  • All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
  • Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.

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