Life Insurance vs. Annuities: What You Need to Know

Life insurance and annuity contracts are both products offered by an insurance company.  And while both products provide financial security, they are very different and address very different needs.

Generally, a life insurance policy pays a death benefit to a beneficiary after the death of the insured; although some types of life insurance may also include a savings component that can be accessed while the insured is still alive. An annuity contract, on the other hand, is primarily a savings vehicle that provides a stream of income payments that can help fund retirement.

In a fundamental sense, life insurance primarily benefits loved ones after a policyholder’s death; annuities are intended to provide regular payments to the policyholder while they are alive.


Key Differences Between Life Insurance and Annuities

  • Beneficiaries—The owner of the annuity contract is generally the primary beneficiary of the contract and will receive the stream of income payments. The beneficiary of a life insurance policy is generally the insured’s spouse, children, or other designated individuals, who will be paid the policy’s death benefit after the death of the insured.
  • Funding—Annuities are typically funded in one lump-sum payment to the insurance company. Life insurance policies are usually funded by premiums (e.g., monthly or annual payments) made over time.
  • Payouts—Life insurance policies generally pay death benefits in a lump-sum, whereas annuities typically pay benefits over time.  However, some life insurance policies may offer payment over time, and some annuities may offer lump-sum payments.
  • Purchase timing—Annuities are typically purchased later in life to provide additional income in retirement. On the other hand, life insurance is often purchased earlier when the death benefit protection (and potential savings component) may be more important to family and loved ones.
  • Underwriting—An applicant for life insurance must generally undergo medical underwriting.  Whether the insurance company is willing to issue a policy, as well as the amount of coverage and the premiums, will depend upon factors like age and health. Underwriting is generally not required for an annuity.

Both life insurance and annuities can offer valuable financial benefits, but each policy has its own rules and considerations.


How RMC Group Can Help

At RMC Group, we understand that navigating the complexities of life insurance and annuities can be overwhelming. Our team of experienced insurance professionals is here to assist you in making informed decisions that align with your financial goals and personal circumstances.

  • Personalized Advice: We take the time to understand your unique needs and objectives, providing tailored recommendations that fit your family and financial situation.
  • Comprehensive Solutions: Whether you need life insurance to protect your loved ones or an annuity to ensure a steady income during retirement, we offer a wide range of products to meet your needs.
  • Expert Guidance: Our knowledgeable advisors will guide you through the application process, help you understand the terms and conditions, and help ensure that you select the best options for your future.

Speak with the insurance professionals at RMC Group to discuss your needs and financial goals. We can recommend financial planning and insurance solutions that align with your unique needs. Contact us today to get started on securing your financial future.