What’s The Difference Between Life Insurance And Annuities?

While annuities and life insurance have similarities, such as offering retirement income, they are not the same and work in seemingly opposite directions. In comparison, life insurance is designed to provide your family with a lump-sum payout when you die, while annuities serve as safety nets for you by providing you with a lifetime of fixed, guaranteed streams of income. In this article, we will take a look at the major differences between annuities and life insurance to find out which is right for you.


There are certain things you need to consider when buying life insurance or an annuity. You purchase an annuity for the purpose of securing your financial income in case you lose your job or retire. Annuities offer tax-deferred savings for retirement income. In contrast, you may want to purchase life insurance so as to make financial provisions for your loved ones after you have passed. While some life insurance plans also provide income-earning and cash value, this is not the primary function of the policy.

How the Payment is Made

There are a couple of different ways in which insurance companies pay out an annuity, which usually depends on whether the annuity is immediate or deferred. When you have an immediate annuity, you will receive income immediately. Whereas with a deferred annuity, payment is made out in a lump sum. As for the life insurance plan, the benefits are paid out in whole after your death.

Benefits Offered In the Cause of Death

This area is quite confusing for a lot of people, especially for those that pay for an annuity. If you die during the period while you are still paying for an annuity, the situation will be treated differently than when you die after you have started receiving the annuity benefits. With an immediate annuity, payments of annuity benefits stop when you die since the benefit is created to benefit you while you are alive. Though, some guarantees can be put in place.

In the case of a deferred annuity, if you die before completely paying for your annuity fee, the insurer will refund all the premiums you have paid to your next of kin. Life insurance, on the other hand, is quite easy to understand – insurance companies are required to pay the benefits to your beneficiaries when you die.

We Can Help

A life insurance plan is the best option for you if your primary purpose is to help your dependent pay for certain expenses upon your death. However, you should consider annuities if you need a plan that gives you a fixed, guaranteed income.

If you are looking to discuss how these options fit into your individual needs, contact Secure Insurance Group to speak with an experienced and licensed insurance expert.