Life Insurance vs Annuity

No one wants to die and leave their loved ones with limited financial resources. Life insurance provides a financial cushion to pay for a funeral, settle up with credit card companies, pay off a mortgage, or provide funds for the education of children. The funds can provide some breathing space while loved ones are grieving.

Another option that some people choose is an annuity. They’re paid upfront and doled out over time to provide a lifetime source of income until the policyholder dies. It’s a strategy that enables individuals to manage their income risk and save tax-deferred money until they’re ready to retire. Life insurance and annuities are often both marketed as tax-deferred alternatives to investing in traditional stocks and bonds.

Life Insurance

Life insurance is the best option for individuals that have limited savings. As long as the monthly premiums are paid, individuals will have a financial legacy for their loved ones in the event that they die. It’s important for anyone purchasing life insurance to understand that there could be a waiting period from the time they make the first payment until their heirs can collect on the policy.

That waiting period is typically 1 to 2 years. However, there are insurers that provide death benefits immediately. Policies that provide Immediate death benefits are typically more expensive.

Annuities

Investing in annuities provides a reliable income source, even after retirement. They’re expensive and the disadvantage is that if an individual dies early, they may not get full value for the money they’ve paid. Annuities were developed to mitigate concerns that people have about not having a sufficient retirement nest egg. Annuities may be set up to deliver a lump sum payment or in installments at a future date.

The first annuities available to the public in U.S. were in 1912. Annuities can be traced back to the Roman Empire, but some argue that they actually originated in Egypt as early as 1100 B.C. The funds were paid to a family during the lifetime of an individual and ended upon the recipient’s death. The practice eventually was expanded to include surviving family members.

For more information about how The Sena Group can help you with any

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The Sena Group
6501 Congress Ave., Ste. 100
Boca Raton, FL 33487