Life Insurance vs Annuity

Life Insurance vs Annuity. Do not overpay for life cover: compare the whole market and save up to 40% on your life insurance.

Life Insurance and annuity are offered by Insurance Companies. Though, they have similarities like term of contracts for specific number of years and can be used for the future. They have differences that people should understand before choosing and purchasing between life insurance and annuity.

The differences between life insurance and annuity

Annuity provides money during your retirement while life insurance provides money when you die. It is said that there is fast accumulation of funds in annuity than in life insurance, because some of the money in the latter will have to pay for the insurance. Both annuity and life insurance give tax benefits. But, if you leave money to a beneficiary in annuity, he will have to pay taxes on the money you put in the contract. They both offer death benefits, but it is said that life insurance has an advantage.

When you pay the annuity and you die, your beneficiary will have the same amount that you pay. Unlike in life insurance, your beneficiary will receive the face amount of the policy that could be doubled or tripled of what you pay. For example, you pay 150$ in annuity, when you die, your beneficiary will receive 150%; in life insurance, even though you pay 150%, your beneficiary will receive the amount of policy you acquire which could be more than 150$. You can even borrow money from life insurance, and as long as the contract is effective, you don’t have to pay tax while annuity doesn’t allow you to borrow money.

Alternatives

If you want to secure your love ones, but did not want to acquire either annuity or life insurance, you must at least have ways to establish your asset to secure their financial needs in the future. Invest on something that will make your assets grow like real estate. Building a business will help.

Benefits

A Life Insurance and annuity offer benefits not only the beneficiaries but the clients’ as well. Aside from your beneficiaries will be secure when you die, you may even rest in peace knowing that your family wasn’t left with nothing, because you invested on something that will sustain their financial needs.

Disadvantages

There are still some who would not go for annuity or life insurance, because they want to really see where their income goes at the moment. They also find it difficult to choose between life insurance and annuity and covers among the two. Others simply don’t buy because they have no dependents at all.

Annuities & life insurance are both made by insurance companies. Though, both of them have features that are similar to one another, their purposes are very much different. Life insurance is about paying money in case of death to cover for the expenses, while annuities offer tax deferred savings after retirement.

The dissimilarity amongst life insurance and annuity

Life insurance is a contract between a person and a company. The insurance company will give a lump sum payment, which is also known as a death benefit to the beneficiaries in case of death, this is in exchange of the premiums paid for by the insured individual. It is typically picked based on your goals and needs. There are different types of life insurance and these are universal, term and whole life insurance. The rate the premium will be determined with certain factors like your health, medical history, lifestyle and vices too.

On the other hand, annuity is a type of contract between the person and the insurance company wherein there is a lump sum payment or numbers of payments that will enable regular disbursements that may be given soon or later on in life. Annuities’ goal is to give a steady income during your retirement age. The money you will get is tax free and it can be withdrawn any time after the age of 60. There are lots of aspects when it comes to annuity that you can personalize to conform to your needs. You can either choose from immediate and deferred annuities too.

What is the best option between life insurance and annuity?

People can choose between life insurance and annuity based on their lifestyle and needs. Those who would like to enjoy a worry free life after retirement can go for annuity, while those who would like to let their family live without worries can go for life insurance. These two offer benefits at different levels.

The benefits

Annuity and life insurance both offer benefits to the insured individual. It’s just that in annuity when you pay one hundred dollars and then you die, your beneficiaries will get one hundred dollars and interests incurred. With life insurance, when you die, beneficiaries will get the whole amount of the policy.

The cons

In life insurance you get the face value of the policy while with annuity you will only get the amount that you have paid in case of death. If you are uncertain about life, go for life insurance, but if you are confident that you will live long after your retirement than annuity is for you.