Which of the following is the best reason to purchase life insurance rather than annuity?
The chief difference between life insurance and annuities is that life insurance provides a cash benefit for your loved ones after you die. In contrast, annuities provide you with a lifetime income until you die. Both include death benefits. Show
Fact Checked A qualified expert reviewed the content on this page to ensure it is factually accurate, meets current industry standards and helps readers achieve a better understanding of retirement topics. Cite Us APA Turner, T. (2022, June 30). Life Insurance vs. Annuity. RetireGuide.com. Retrieved October 29, 2022, from https://www.retireguide.com/annuities/compare/life-insurance-vs-annuity/ MLA Turner, Terry. "Life Insurance vs. Annuity." RetireGuide.com, 30 Jun 2022, https://www.retireguide.com/annuities/compare/life-insurance-vs-annuity/. Chicago Turner, Terry. "Life Insurance vs. Annuity." RetireGuide.com. Last modified June 30, 2022. https://www.retireguide.com/annuities/compare/life-insurance-vs-annuity/. Why Trust RetireGuide.com Content created by RetireGuide and sponsored by our partners. Key PrinciplesRetireGuide’s mission is to provide seniors with resources that will help them reach important financial decisions that affect their retirement. Our goal is to arm our readers with knowledge that will lead to a healthy and financially sound retirement. We’re dedicated to providing thoroughly researched annuity information that guides you toward making the best possible financial decisions for you and your family. We partner with Senior Market Sales (SMS), a leader in the insurance industry with over 30 years of experience and a network of 66,000 independently licensed agents across the United States. Our partnership with SMS (and Insuractive, the company’s consumer-facing branch) allows us to deliver expertly researched and reviewed content at no cost or obligation to all of our visitors. It also gives our visitors the opportunity to take the next step in their financial journey by requesting help from our partner through the phone numbers or forms provided on our website. If a visitor chooses to inquire about an annuity or other financial product through SMS as a result of our research and accurate information, RetireGuide may receive compensation for connecting the visitor with SMS. The revenue we earn for helping visitors get the help they’re seeking makes RetireGuide stronger for our audiences. The content and tools created by RetireGuide adhere to strict editorial guidelines to ensure quality and transparency. Editorial IndependenceWhile the experts from SMS are available to help you navigate various annuity options, RetireGuide retains complete editorial control over the information it publishes. We operate independently from SMS, which allows the award-winning RetireGuide team to provide you with unbiased information. Visitors can trust our inflexibility regarding our editorial autonomy. We do not allow our partnership to influence RetireGuide’s editorial content whatsoever. What Is the Difference Between an Annuity and Life Insurance?You should consider life insurance and an annuity when planning your retirement. Each can play a role in providing long-term financial security for you and your loved ones. What Are Annuities?According to the National Association of Insurance Commissioners, annuities are a type of life insurance contract sold by insurance companies. The two main types of annuities are immediate and deferred.
Deferred vs. Immediate Annuities
Source: Insurance Information Institute There are different reasons for purchasing different types of annuities. A financial professional can help you compare annuities so you can determine which type is best for your particular financial situation and retirement plans. On Medicare? Maximize your 2023 savings! The Medicare Annual Enrollment period is now open. Visit GoHealth today to see what savings you may qualify for with a new plan. What Is Life Insurance?There are several different types of life insurance, but all types are designed to pay money to a “named beneficiary” upon your death. The beneficiaries are usually your loved ones but can be one person, multiple people or even a company or other organization. The two main types of life insurance are term life and whole life insurance.
Term Life vs. Whole Life Insurance
Is an Annuity or Life Insurance Right for Me?Both life insurance and annuities are long-term investments that can be an important part of your retirement planning. You may want to include both in your long-term financial plan. Or you may decide that one is better for you than the other. You will need to decide what end goal is best for you:
When weighing these questions, you’ll need to consider the pros and cons of each option. And ultimately, you may want to talk to a licensed financial advisor to determine how each option may work for you. Pros and Cons of Annuities?Annuities are a good option to provide a guaranteed lifetime income – especially if you don’t have a traditional pension through your employer. But, like any investment, there are potential downsides that you have to consider. Pros and Cons to Consider Before Buying an Annuity PROS
CONS
Pros and Cons of Life Insurance?Life insurance is typically meant to take care of your loved ones once you’re gone. It can provide them with an income in your absence or help them pay off debt. If you provide the majority of the household income, life insurance can help your loved ones maintain their lifestyle even though they are no longer there. Pros and Cons to Consider Before Buying Life Insurance PROS
CONS
Making Your Decision on an Annuity or Life InsuranceDeciding on buying life insurance or an annuity – and what type of each – requires you to consider many options. You also have to consider a multitude of factors – just a few of which include:
There are other considerations you need to take into account as well. Both life insurance and annuities can be costly and long-term commitments, but the payoff may provide great returns for you or your loved ones. Risks and benefits of both annuities and life insurance vary from person to person. There are no cookie-cutter or off-the-shelf answers to what is best for you. Talking to a licensed financial professional will help you get closer to an option that is more of a custom fit for you. A financial professional can help you understand the advantages and disadvantages of life insurance and annuities in your specific situation. Last Modified: June 30, 2022 7 Cited Research Articles
What are the main reasons that people choose to purchase life insurance?5 Reasons Why Life Insurance Is Important. It Can Help to Financially Protect Your Family.. It Can Replace Lost Income.. It Can Help Your Loved Ones Pay Off Debt.. It Can Cover Funeral Expenses.. It Can Help to Pay for Future Education Expenses.. Protecting Your Family's Future With Life Insurance.. Which is Better life insurance or annuity?Both annuities and life insurance should be considered in your long-term financial plan. While both include death benefits, you buy life insurance in the event you die too soon and an annuity in case you live too long.
What is the biggest advantage of term life insurance?Less expensive
On average, life insurance rates are more affordable for term than whole life insurance because term policies offer coverage for a predetermined time. If you outlive the term and the policy expires, your beneficiaries don't receive the death benefit, so it's less of a risk to the insurer.
What is the main benefit of a life insurance annuity policy?What is the potential benefit of an annuity paid for with life insurance death benefit? It can complement the protection offered by a life insurance policy by turning the beneficiary's one-time income tax-free payout into lifetime income that's guaranteed.
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