Life Insurance and Annuities
Life insurance and annuities are two types of long-term investments for financial planning that people often get mixed up with each other. While annuities are designed to provide money for you to live on, the goal of life insurance is designed to provide for others when you pass away.
There are several types and also advantages and disadvantages to both life insurance policies and annuities.
For more information or to schedule an appointment, please contact Stewart at 303-996-0354 or jstewart.racey@comcast.net.
What is Life Insurance?
There are two types of life insurance: Term and Whole life insurance (or permanent).
- Term life insurance is only for a period of time – for example 20 years. It works best for people who want insurance until they reach retirement age, or to cover other types of time-specific situations.
- Whole life insurance provides money to your survivors after your death. With universal whole life, the premium goes toward a death benefit and in a savings or low-risk investment. With variable whole life, more of the premium goes toward riskier investments. Variable universal whole life insurance is a combination of universal and variable.
What are Annuities?
Annuities are another type of financial product sold by insurance companies. Money that you put into an annuity is then used to provide you with monthly (or annual) payments. However, this is not a bank, where you deposit money and have a balance that must be maintained. An annuity is designed to provide you with additional money, but it’s a gamble.
- Immediate Annuities are obtained by making a lump sum and you start receiving payments immediately. For example, if during your late 60’s, you took $110,000 and bought an immediate annuity, you could receive roughly $7,000 a year every year for the rest of your life.
- Deferred Annuities are paid out at a time in the future, for example, when you retire.
Annuities can also be fixed or variable. Fixed annuities have a fixed interest rate for a specified period of time. Variable annuities are placed in a variety of stocks, bonds and mutual funds and the rate of return is dependent on the performance of those investments.