Co-Founder, Coastal Financial Partners Group, California
They meet different needs. It depends on your needs. For pennies on the dollar life insurance insures against not living long enough while annuities insure against living too long. Life insurance provides a normally income tax-free death benefit that can replace lost income while an annuity death benefit is subject to income tax.
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
You might chose cash value life insurance over an annuity because you want the death benefit a life insurance policy brings while at the same time providing cash accumulation. Or you might want cash value life insurance over an annuity for the legal safety it provides in case of a lawsuit. This is a great question with many possibilities for the person involved and if in such a position to purchase should be examined.
There are many different reasons to use life insurance, and there are many different reasons to use annuities. The products are totally different and can be adapted to many purposes. A good agent will discuss your financial objectives and help you to discern the best products to meet your needs.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
It depends on what you're trying to accomplish. Annuities provide cash while you're still living - Life insurance provides cash upon death of a person.
With life insurance, you're paying a continuous premium until the death of the insured or you no longer want the policy. In exchange for the premium, the carrier agrees to pay out the face amount as cited on the policy should the insured die during the life of the policy.
With annuities, you're paying a large sum of money (if single-premium annuity) or periodic payments (flexible premium periodic payment annuities) in exchange for the return of monthly payments with interest over a given time frame (various options).
Life insurance may be the more suitable route if you're looking to settle debts, pay off estate taxes, etc., so your family is not stuck with the bills when you die. An annuity may be more suitable if you're looking to help plan for your retirement.
In many situations, people will have both life insurance and annuities in their financial portfolio.
Great question! Life insurance is used mostly as a way to pass on wealth. You leave a chunk of money behind you to either pay off the debts you've left, provide for your funeral expenses, or to pass on wealth to loved ones. You provide an income for those left behind. Annuities, on the other hand, are a way to transfer wealth to a later date, when you start drawing it out in an income stream. For most people it is a way to pass on income to yourself in retirement, when you need it most. So to answer your question, I'd purchase life insurance to leave behind a legacy for my children, and an annuity to provide an income stream for my wife and I in our retirement. That allows us to live comfortably, and still leave behind a legacy. If you would like more detail, please contact me, I'm happy to help! Thanks for asking!
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Life insurance solves the problem of dying too soon. An annuity solves the problem of living too long. They both can accumulate cash on a tax deferred basis. Both rely upon the promises made by an insurance company. IF your concern is to provide cash in the event of premature death, then you want life insurance. If it is to provide a guaranteed income for the rest of your life then you want an annuity.
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With life insurance, you're paying a continuous premium until the death of the insured or you no longer want the policy. In exchange for the premium, the carrier agrees to pay out the face amount as cited on the policy should the insured die during the life of the policy.
With annuities, you're paying a large sum of money (if single-premium annuity) or periodic payments (flexible premium periodic payment annuities) in exchange for the return of monthly payments with interest over a given time frame (various options).
Life insurance may be the more suitable route if you're looking to settle debts, pay off estate taxes, etc., so your family is not stuck with the bills when you die. An annuity may be more suitable if you're looking to help plan for your retirement.
In many situations, people will have both life insurance and annuities in their financial portfolio.