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While life insurance and annuities have similarities, they are not the same. Both can provide you with retirement income, but annuities may be a better choice for achieving this goal. Life insurance, on the other hand, is more commonly used to support your dependents and beneficiaries financially after you die. Learn more about the differences between life insurance and annuities to find out which is right for you.
Life insurance plans provide income for your dependents if you die sooner than expected. Some life insurance policies do offer cash value and income-earning options as well as other living benefits like a critical care coverage option. However, this is not the main function of a life insurance policy. Its main function is to care for your dependents after your death and pay for end-of-life/final expenses. Annuity plans are designed to provide retirement income to the plan owner if they live beyond the expected lifespan. Annuities provide tax-deferred savings for retirement income. If you have your own life insurance policy, you likely hope that you never actually see the payout. It's meant to be distributed to your beneficiaries only in the event of your death. It can help them with final expenses, debt, education costs, and more. With an annuity, the plan owner does receive a payout while they are still living. While the annuity does have a death benefit for beneficiaries, it is not tax-free. Most life insurance plans can be divided into either term life or whole life insurance.
Some term life insurance policies offer the option to be converted into a whole life insurance policy when the term expires. Annuities, on the other hand, are generally referred to as deferred, immediate, or longevity annuity plans.
The key to determining which plan is right for you—annuity or life insurance—is to look at your purpose. Life insurance is your best choice if your main purpose is to help your dependents and other beneficiaries pay for your final expenses, bills and have money left to live on remaining. This option is passed on tax-free to your beneficiaries. On the other hand, if you are looking for a plan that offers you a retirement income, then you should be considering annuities. This is because the annuity offers tax-deferred savings and retirement income. Simply put—life insurance protects your loved ones if you die prematurely, while the annuity protects your income if you live longer than expected.
Both plans can provide death benefits, but each is a very different option with different purposes. If you need guidance in deciding if a life insurance plan or annuity is right for you, consult a life insurance or annuity planning consultant to discuss all the options. Many reputable companies offer both life insurance and annuity plans. You can find a company either on your own or through your insurance agent. If searching yourself, consider some of these top-rated companies offering both plans when comparing rates: AIG, Symetra, Sagicor, Americo, American Fidelity, New York Life, Bankers Life and Casualty, and more. Be sure to check out the company’s financial strength ratings and customer service record with insurance rating organizations such as AM Best and J.D. Power & Associates. If you're trying to choose between life insurance and an annuity plan, think about your main purpose for purchasing the plan. If you want to support your beneficiaries and other dependents financially after your death, life insurance might be right for you. But if you're looking for additional retirement income, an annuity might be your best option.
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Life Insurance GuideThere are many reasons why life insurance policies or annuity contracts are purchased, but these reasons should be based upon your financial planning needs.(17)… For this reason, the bank can purchase life insurance on the life of the that the proposed insured is younger than age 15, one of the following persons (18)… Study Chapter 2 – Life Insurance Basics flashcards from nia Scott’s class What is the best reason to purchase life insurance rather than annuities?(19)… Those worries can be eliminated by buying annuities. The promise of income for life is also insurance against outliving your assets. With a life annuity, no (20)… 7. Buying Life Insurance and Annuities in MassachusettsMany Whole Life Insurance policies also earn dividends, usually on an annual basis. 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Which of the following is the best reason to purchase a life insurance rather than annuities?
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