Life Insurance Basics
What is the difference between life insurance and an annuity?
Life insurance and annuities are both insurance products but serve opposite purposes. Life insurance protects against dying too soon — it pays a death benefit to your beneficiaries. An annuity protects against living too long — it provides guaranteed income for life. Both can be used for estate planning.
Key Points
- Life insurance: protects against dying too soon — pays death benefit
- Annuity: protects against living too long — provides guaranteed income
- Both can be used for estate planning
- Life insurance: beneficiaries receive death benefit tax-free
- Annuity: income is taxable (for non-qualified annuities)