While life insurance policies and fixed annuities can both be purchased through insurance companies like VTC Insurance Group, these financial products satisfy very different needs.

Generally, life insurance policies offer a death benefit to beneficiaries after the policyholder passes away. However, some types of life insurance may also include a savings component that can be accessed while the policyholder is alive. Conversely, instead of a death benefit, fixed annuities provide a pension-like stream of income that can help fund retirement.

In a fundamental sense, life insurance primarily benefits loved ones after a policyholder’s death, while annuities are intended to provide regular payments to the policyholder. Here’s a closer look at the differences between the two:

Beneficiaries: With annuities, the policyholder and, in some cases, a spouse are the primary beneficiaries, so they receive all income payments. With life insurance, a spouse, children, or other designated individuals are the primary beneficiaries, so they receive the death benefit after the policyholder’s passing.

Funding: Annuities are typically funded in one or more lump-sum payments to the insurance company. Life insurance policies are usually funded by premiums (e.g., monthly or annual payments) made over time.

Payouts: Annuities typically pay benefits monthly over time, whereas life insurance often pays the death benefit in one lump sum. However, in some situations, life insurance payouts may be adjustable.

Purchase timing: Life insurance is often purchased earlier when the death benefit protection (and potential savings component) may be more important to family and loved ones. On the other hand, annuities are typically purchased later in life to provide additional income in retirement.

Underwriting: Individuals typically apply for life insurance coverage, and their acceptance is often based on factors like age and health. Underwriting is generally not required for an annuity.

Learn More From a Life Insurance Leader

Both life insurance and annuities can offer valuable financial benefits — but each policy has its own rules and considerations. For additional insight, reach out to the life insurance professionals at VTC Insurance Group. We can recommend financial planning and insurance solutions that align with your unique needs. Give us a call at 248.828.3377 or visit vtcins.com.

This blog is for informational purposes only and is not intended as legal advice.