Everybody value their lives and future. That is why they choose to buy a life insurance or an annuity. In choosing to buy either of the two, be sure to make their differences and similarities. Weigh them both and be sure to consider buy one of them.
Some people may look at life insurance and annuity similarly when in fact, a big difference lies between the two. Life insurance is a contract between an insurer and insurance company to assure the financial stability of the insurer’s beneficiaries, may it be his or her spouse or whole family, after his or her untimely death. Life insurance comes with a peace of mind. No matter what happens tomorrow or the day after, your loved ones will be financially safe at some time. It also gives different advantages for the insurer. That is when, he or she has a debt, the insurance will pay that debt off after he or she passed away. The insurer’s family will no longer have to worry about that anymore.
There are many types of life insurance out there to be choosing from. One thing is common among those all. They are designed to guarantee the beneficiaries of the insurer a life worthy of living even after his or her death.
On the other hand, annuities in general are designed to meet the saving goals of a retiree. The investment option can also be either fixed or immediate. If he or she needs money in monthly payment basis, he or she could choose among the immediate annuities. If he or she needs it after retirement or even after a few years after his or her retirement, then deferred annuity is just the right choice for him or her. Whichever of the two, fixed investment gives an assurance of stability to the interest rate of the annuitant’s account. Variable investment offers flexibility to the interest rate depending on the fluctuations of the investments performance.
Somehow, an annuity also serves as a life insurance for the annuitant. His or her living beneficiaries will also receive an amount of money after he or she dies. However, not all kinds of annuity give this kind of advantage. Joint and survivor annuities are the examples of the annuities that cover this.
Before choosing what to buy between the two, it is necessary to assess what a person really needed. Life insurance is highly recommended to be bought at a young age when a person is still fit and young. Annuities are endorsed to be bought when the retirement date of a person is nearing. Basically, buying an annuity at a young age is not that recommendable for sooner or later, the annuitant will really need money to withdraw. Withdrawals before the dispersing period or exceeding the amount of money permitted to be withdrawn at that time will cause charges and penalty.
What should be considered first before buying any of the two? Try to internalize what you really, really need and want. Are you still young and healthy? Then probably, life insurance may be the one suited for you. The younger your age when you buy, the more benefits that you may get in the future. But you also have to bear in mind that, life insurance pays off after your untimely death. You cannot make withdrawals in case of your great need of money. If you are a retiree, on the other hand, annuity may be the right option for you. Getting a life insurance at an older age is a great thing but may not be as great when purchasing one when young. However, choosing between the two is not just about the age of a person. There are also other factors to be considered like health and financial status. You should be equipped with the right knowledge first, life insurance vs. fixed annuity – make sure to weight things first and make the consideration.