An annuity is a contract between an insurer and a policyholder that calls for the insurer to make periodic payments to the policyholder for a set period. You as a purchaser will invest in the annuity planning you have chosen either in a lump payment or over time. 

In retirement planning, an annuity is viewed as a way to guarantee a stable income stream throughout your post-work years. Numerous insurance firms, banks, and other financial institutions offer various annuity options. Which type of annuity should you get, then? Read on!

How do Annuity Plans Work? 

The payments from Annuity Plans are guaranteed and made over a certain time, usually several years. Retirement annuities, which provide a regular income stream beginning at a predetermined age, are the most popular form of annuity. 

In the earliest part of an annuity’s lifecycle, known as the “accumulation stage,” you pay into the annuity. The second phase, the annuity phase, begins when you start getting annuity payments.

Different Annuity Options in India 

In India, you can choose from various annuity plans

Here are a few examples: 

  1. Life

An annuity for life guarantees you a regular income for the rest of your life. 

  1. Increasing/growing

Payments from a rising annuity will rise by some predetermined percentage each year. The payments may go up once a year, or they could go up at the end of every pay period. 

  1. Immediate

If you choose to invest in an immediate annuity, you will get a regular payout starting from the day you invest.

  1. Fixed 

You can start receiving payments from a fixed annuity right away or at some point in the future. The payments will neither increase nor decrease as time goes on. 

  1. Deferred

Deferred annuity plans provide you a steady stream of payments beginning at a future date, usually when you’re retired. 

  1. Limited

Offers a steady stream of payments for the rest of your life, but the insurance company gets to retain any funds left over in the event of your untimely demise.

  1. Variable

In contrast to fixed-rate annuities, the rate of return on a variable annuity can fluctuate over time. An annuity with a variable rate of return is one whose payout is tied to the value of a portfolio of stocks, bonds, or other investments. 

Four primary types of annuity plans: 

Immediate Fixed

An annuity that begins making regular payments to you right after you buy it. 

Deferred Fixed

Deferred annuities begin paying a predetermined set amount regularly a few years after the initial investment. 


An annuity begins paying you instalments as soon as it is bought, although the amount may change based on the underlying asset and market conditions.

Deferred Variable 

A deferred variable annuity similarly begins paying you some years after the initial investment, but the sum may change based on:

  1. Market circumstances and the underlying asset 
  2. The rising annuity’s fixed rate of return

How do you decide which annuity plan is best?

You can choose the ideal annuity plan depending on your unique goals and financial position. When selecting an annuity plan, take into account the following factors:

  • How old are you?
  • Your preferred form of annuity
  • Investing Purposes 
  • How willing you are to take risks
  • The state of your finances

What kind of annuity plan you pick depends heavily on your age. You should consider your investment objectives while deciding on an annuity. An immediate annuity is a good option if you need a steady stream of money immediately. 

Choosing a deferred annuity may be good if you’re hoping for long-term growth. Your level of comfort with risk will also play a part in determining the sort of annuity you select. For a better rate of return, you may select a higher-risk annuity plan.


Although all types of annuity plans have the same purpose, there are some differences in how they work. If you are ready to take on risk, a variable annuity is ideal, but fixed annuities are better suited for cautious investors. 

Additionally, if you’re close to retiring, you should consider a deferred annuity; an immediate annuity would be a better option for those with more time before doing so. Regardless of the type of plan, an annuity is a tried-and-true investing strategy and a great way to secure your financial future. Therefore, buy one right away!