Life insurance and annuities are similar, as they both provide a financial cushion, but they are very different in how money is received and who receives it. When considering your long-term financial planning, it’s important to determine if life insurance or an annuity is better for your situation. In this blog, we break down the difference between annuities vs. life insurance.
Types of Life Insurance
Life insurance is an easy way to make sure your loved ones are financially protected should something happen to you. There are several types of life insurance, with the two most common types being term life insurance and permanent life insurance.
Term life insurance
Term life insurance is one of the most affordable forms of life insurance. As the name suggests, you have the option to choose your term length and only buy it for as long as you need it. The lengths typically available are 10, 15, 20, 25 and 30 years.
Permanent Life Insurance
Permanent life insurance includes a number of life insurance products that provide lifelong protection. Permanent life insurance premiums go toward both maintaining the policy’s death benefit and allowing the policy to build cash value.
Whole Life Insurance
Whole life insurance is a type of permanent life insurance and provides a set amount of coverage for as long as you live, for which you pay monthly premiums. In addition to providing a death benefit, whole life insurance also includes a savings component known as the cash value.
Universal Life Insurance
Universal life insurance is a form of permanent life insurance that has a primary benefit of using the policy’s cash value to pay for premiums. The value accrues and earns interest (which is subject to change) as you pay monthly premiums, lending the opportunity to also act as a savings account.
Simplified Issue Life Insurance
Simplified issue life insurance is a form of final expense insurance in which your coverage is based on a questionnaire on your health and lifestyle rather than a medical exam. Simplified issue life insurance can be a good life insurance choice for both seniors and individuals with health problems.
Guaranteed Issue Life Insurance
Guaranteed issue whole life insurance is just as the name implies; guaranteed. If you’re between the ages of 45-85, you can’t be turned down, therefore it’s often a promising life insurance choice for seniors or individuals with health concerns. Oftentimes, no medical exam is required.
Annuities are, essentially, a contract with an insurance company in which you agree to pay the carrier a certain amount of money in a lump sum or through installments, entitling you to a series of payments that last for a specific time span. There are two types of annuities—deferred annuities and immediate—and all annuities grow on a tax-deferred basis.
Which is better for you—life insurance or annuities?
While life insurance guarantees income in the event of your death, annuities guarantee income in the event you live longer than expected. Whether a life insurance policy, an annuity, or both is right for you, it can be determined by long-term plans for your money and your lifestyle. You’ll want to figure out whether your goal is to provide income for yourself while you live or to provide income for your family in the event of your passing.
SelectQuote Can Help You Decide if Life Insurance is For You
Sifting through all the options, prices and fine print of life insurance can be overwhelming. At SelectQuote, we will shop some of the most trusted life insurance companies in the nation on your behalf, compare prices and coverage for you to provide you with the options available to you.