The IRDAI has made it mandatory for all life insurers to offer from 1 April a standard annuity product it has developed for the average customer.
The single premium, non-linked, non-participating plan, called Saral Pension with the insurer’s name prefixed, will have simple features and standard terms and conditions. The minimum annuity payable is INR1,000 ($13.72) per month, INR3,000 per quarter, INR6,000 half yearly, and INR12,000 per annum. The purchase price, to be determined by insurers, will depend on the annuity amount. The plan is targeted at those aged between 40 and 80 years. There is no maturity benefit under the policy.
The product would reduce mis-selling as well as potential disputes between insurers and customers, the IRDAI says. The regulator says that a standard product will broadly meet the needs of an average customer who otherwise would have to select an annuity plan from among several individual immediate annuity products marketed by life insurers, with each product having its own features, terms and conditions, and annuity options.
The regulator stipulates two annuity options that can be offered.
Under the first option, there is the life annuity with a return of 100% of the purchase price. The annuity will be paid for life. In addition, 100% of the purchase price will be paid to the nominee / legal heirs on the death of the annuitant.
Under the second option, which is the joint-life last-survivor annuity with a return of 100% of the purchase price, the annuity is first paid to the annuitant for life. After the death of the annuitant, if the spouse is surviving, he/she will continue to receive the same amount of annuity for life. On the death of the spouse, the purchase price shall be payable to the nominee/legal heirs. In the case where the annuitant survives the spouse, the purchase price shall be payable to the nominee/legal heirs on the death of the annuitant.