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? up-arrow

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

Do Immediate Annuities Offer Investment Growth? up-arrow

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? up-arrow

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.