Annuity plans provide you with a cushy retirement income should you live beyond the end of your life insurance plan policy. For instance, if your life insurance policy ends when you’re 60, and you live beyond 60, a life insurance annuity can be a solid source of tax-deferred savings.
With life insurance, you pay smaller premiums monthly and the payout happens after you pass and it benefits your beneficiaries. But with annuities, you pay one, larger amount upfront to your insurance company and the company will give you set monthly payments as long as you live. So, you see the perks of this plan.
And there is a death benefit for beneficiaries with annuities—it’s just not tax-free.
Life insurance annuity can be one of the most convoluted concepts in the already confusing world of insurance—but we’re about to make it easier to understand.
Simply put, traditional whole life insurance gives your beneficiaries money if you die and annuities provide you with money if you live beyond the terms of your life insurance policy. So, one option financially benefits other people after you’re gone and the other option mainly benefits you, in this life.
There are benefits to both types of policies, as well as drawbacks. One will always outweigh the other, depending on who you are and what you want from your life insurance. So, with this in mind, let’s dive deeper into life insurance annuity to help you decide if this type of coverage is right for you.
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There are three types of annuity life insurance: immediate, deferred, or longevity plans.
Let’s take a look at them.
We’ve already touched on a few of the key differences between annuity vs. whole life insurances, but it bears reviewing them and expanding, just so you get the complete picture and can make the best choice possible.
| Annuity Life Insurance | Whole Life Insurance | |
|---|---|---|
| Reason to buy it | Provide income for you after you retire, so you don't outlive your income | Provide income for dependents after you die |
| Pays out | Typically monthly, one year after you buy the annuity (if immediate) or whenever the deferred period is over | When you die |
| How it pays out | In a single sum or income--depends on the type of annuity you choose. | In a single sum |
| When to buy it | 40s to late 70s | 20s to 60s |
| Taxable | Yes | No |
| Is there a death benefit | Yes | Yes |
| You can get (almost) immediately and benefits you, in this life | Pays your beneficiaries after you die | |
| It is paid for in one, large premium payment, and then pays out monthly as long as you live | It is paid for in smaller, monthly payments and runs until the end of your policy—not necessarily the end of your life | |
| It is most often acquired mid-life or close to retirement (depending on the kind of policy you get) | It is most often acquired in your twenties or thirties when you have young dependents and/or more debts |
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That depends on how much you want it to pay out. Annuity plans typically range from $50,000 upwards of $300,000. The payout per month likewise depends, but to give you an idea, a 65-year old man who invests $100,000 in an annuity would receive around $494 per month.
To get a better idea of which life insurance with an annuity policy is best for you, request a free quote. We’ve done our homework, sourcing dozens of the best annuity insurance providers and will match you with the ideal provider for you. Get a quote now.
Investment experts generally recommend getting an annuity as early as 50 years of age and as late as 75, but ultimately, it depends on your unique circumstances.
The purpose of an annuity, remember, is to maintain a source of income, so the best time for many is around the time you’re going to retire—depending on what kind of annuity investment you are opting for (variable, fixed, or traditional) and if you’re getting an immediate, deferred or longevity annuity. If it’s deferred or longevity you will want to get it earlier than you plan to retire, ideally between 40 and 65 years of age.
It could be! You’ve read this far, so you should have a good idea of whether or not life insurance with an annuity is right for you.
When in doubt, get a quote from us. We’ll match you with your ideal annuity life insurance, and you can get a better idea of the price, as well as whether this form of coverage is a smart investment.
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Claire Smith Claire is a creative entrepreneur with a variety of marketing and content creation skills, including blog and web copy writing, research, and strategy. She has a Masters in Cultural Studies from Queen's University and is known for thinking laterally about marketing, based on her deep knowledge of people and behavior.
