Life Insurance vs Annuity: What Are the Differences?

Did you know that more than 100 million adults in the United States of America have a life insurance policy? There is a big debate about which is a better option when it comes to life insurance vs. annuity. Both options are great for looking after the people that mean the most to you by distributing your assets to them.

Each option has its own benefits and drawbacks, and you owe it to yourself to learn more about what is an annuity and what is life insurance. The good news is that you’ve found the perfect annuity guide and life insurance guide to help you with your journey.

Keep reading this article to learn more about annuities and life insurance today!

What Is an Annuity?

An annuity is a life insurance contract that you purchase from a life insurance company. The two main types of annuities that people look to purchase are immediate annuities and deferred annuities. Immediate annuities allow you to start collecting payments after a year after you make a one-time payment to the life insurance company.

Annuities differ from life insurance policies because they pay out over the course of your life after you’ve purchased your annuity contract. They’re great to look into when you start getting closer to retirement from your chosen career.

They are great for anyone that wants to continue getting a guaranteed income each month for the rest of their life. It’s up to you to determine if a deferred annuity is a better fit for your needs than an immediate annuity.

What Is Life Insurance?

Life insurance policies are quite a bit different than annuities because the money included in your policy doesn’t get released to the beneficiaries until after you’ve passed away It’s up to you to determine how many beneficiaries you want to include in your life insurance policy and who those people will be.

There are two primary options that you’ll need to choose from when you pick out your life insurance policy like those at https://shelterbay.ca/seniors-life-insurance/. Term life insurance works by paying out a large sum of money if you die prior to reaching a certain age. The policy is usually a five-year or ten-year policy.

Whole life insurance is the more costly option but it provides you with coverage for the rest of your life. When you pass away your beneficiaries will receive the death benefit that was included in your life insurance policy. Your loved ones will end up receiving income payments to replace the money that you brought in each month.

Now You Know the Difference Between Life Insurance vs. Annuity

When retirement draws closer, odds are that you’ll be advised to look into life insurance vs. annuity. Each is a great option if you want to provide money to your loved ones and close friends. Annuities are great if you want to add to your income as you age. A life insurance policy will provide money to your loved ones at the time of your passing.

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