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Market Intelligence › Basic Terminologies
The variants of an annuity, and the fact that the decision cannot be reversed
Published by The Retail Trader · JUL 26, 2026 · Retirement & Insurance
An annuity is a contract in which you pay a lump sum and in return receive a regular payout for life. Its biggest benefit is certainty, and the most important thing is that the decision cannot be taken back.
The simplest variant pays out only for your lifetime and nothing after that. Its rate is the highest.
In the joint life variant the payout continues to the spouse as well, and in the return of purchase price variant the principal amount goes back to the nominee. In both, the payout rate comes down.
These points come with an annuity:
• The payout is usually fixed, so inflation keeps eroding its value.
• The decision is irreversible — there is almost no surrender option.
• The rate is fixed on the day of purchase, and it depends on the interest rate cycle.
• The payout is taxed, so the net payout is the real number.
The right job for an annuity is to cover basic needs — household expenses, medicines, bills. The portion above that can sit somewhere it can grow with inflation, because a fixed payout thirty years from now is not worth what it seems today.
This article is educational only — it is not a buy or sell recommendation, it makes no claim of guaranteed returns, and it is not advice. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.