Annuity Vs Life Insurance

Life insurance protects your beneficiaries by replacing lost income and providing funds for expenses.

Annuity vs life insurance. Most people purchase an annuity to safeguard their financial future during retirement. Life insurance pays you money when someone dies and annuities give you money every day during retirement. In the most basic terms life insurance covers costs if you die too soon and annuities make sure you dont run out of money if you live a long time.

Both products are often marketed as ways to delay or avoid taxes. A life insurance annuity is only available to life insurance beneficiaries receiving the death benefit. While an annuity contract pays a specified amount on a monthly quarterly or annual basis to meet future financial needs usually in retirement life.

Life insurance is designed to provide financially for your loved ones when you pass away. The key difference between annuity and life insurance is that annuity is a means of retirement plan where an individual keeps aside a lump sum of money to be used in retirement whereas life insurance is taken out to provide economic protection for dependents at the death of the individual. Life insurance protects your family if you die during your working years and an annuity provides post-retirement income.

With annuities you have to pay taxes on any death benefit. However unlike investments in stocks or bonds annuities. Life insurances main purpose is to provide a death benefit while annuities provide income while youre alive.

They also have high expenses that make investments less profitable. Life Insurance death benefits pass lump sum and tax-free to your heirs. An annuity contract and a life insurance policy are both insurance productsand thats what makes them similar.

They are in fact designed to serve the exact opposite purpose. In certain types of annuity and life insurance a beneficiary who takes either policy to gain the legal. Annuities are designed to set yourself up for retirement until your death.