Single vs joint-life annuity: Pros and cons

Time and tide wait for none. Ageing is an inevitable process and everyone has to take retirement from work. In post-retirement period it is important to have a flow of income so that anyone can meet daily needs. An annuity is a type of insurance that ensures regular lifetime income.

Types of annuities

There are different types of annuity options available and some of the prominent ones are listed below:

i) Life annuity

Annuities are paid in the opted frequencies (monthly/quarterly/yearly) until death.

ii) Life annuity with return of purchase price

Policyholders will get annuity payouts in monthly, quarterly or yearly which he or she has opted until demise. After the death of the policyholder, the corpus used to purchase the annuity is paid to his or her nominee.

iii) Annuity payable for a guaranteed period

Annuity can be paid for the guaranteed period, even after the policyholder’s demise. Annuity stops either on his or her demise or on completion of the guaranteed period, whichever is later.

iv) Joint life annuity

Annuities are paid until either you or your spouse is alive.

v) Joint life annuity with return of purchase price

These annuities are paid until you or your spouse is alive. After the demise of both, the nominee will get the amount initially invested.

Single life annuity — advantages, disadvantages

A single-life annuity pays only until the death of the policyholder or until the end of the guaranteed period, whichever is earlier. It is suitable only if he or she does not have any financially dependent family member.

Pro: Pays a higher level of income than a joint life annuity.

Con: Will not provide your spouse or financial dependent with an income if you pass away.

Joint life annuity: Pros and cons

In the case of a joint-life annuity, money is paid to you until your death and to your spouse until his or her passing away. It is useful if your spouse does not have their own annuity/pension plan or if the plan will not be sufficient to meet the financial needs.

Pro: Will provide your spouse or financial dependent with an income if you pass away.

Con: Pays a lower level of income than a single life annuity.

Single life vs joint life annuity

There is no straightforward answer and the decision depends on each person’s circumstances.

“Nowadays, the interest rate on small savings schemes is going down. Annuity plans are one of the best options for senior citizens. If one’s spouse is dependent on financial support, then a joint annuity would suit them,” said Mukunda Chatterjee, development officer at Life Insurance Corporation of India.