Connect with us

Insurance

Differences Between Life Insurance Policies and Annuity Contracts

Published

on

Differences Between Life Insurance Policies and Annuity Contracts

Introduction

At first sight, we feel that these two concepts have different goals. The main goal of life insurance policy is to offer the lump-sum cash pay-out if the policyholder left his/her life such that to make his/her earn his/her lovely family members financially convenient. Life insurance policies provide good coverage for the policyholder and his/her family members at any troublesome situation.

Then, what is an annuity? It is like a protective shield around an individual by offering lifetime guaranteed paths of income. Bond investments and traditional stock are tax-deferred alternatives for the products of the annuity. They have more significant expenses, such that would reduce investment returns.

Both life insurance policies and annuities offer tax-deferred basis to invest. There are two types of annuities. They are qualified annuities and nonqualified annuities. Qualified annuities fund with pre-tax dollars while nonqualified annuities fund with post-tax dollars.

Another thing is that both of the pensions and life insurance policies bend more towards hefty fees. As annuities, there are few types of life insurance policies too. They are simple term life insurance policy, permanent life insurance policy, whole life insurance policy, and variable life insurance policy.

 Life Insurance Policies and Annuity Contracts
Life Insurance Policies and Annuity Contracts

Life Insurance Policies

  1. Simple term life insurance policy.
    This policy offers a death benefit for the beneficiaries of the policyholder after his/her death.
  2. Whole life insurance policy.
    Here the life insurance company provides loans for the policyholder according to the conservative investment portfolios.
  3. Permanent life insurance policy.
    This insurance policy is known as cash-value policies too. This insurance policy has a savings component. So the premium fee may be a little bit high.
  4. Variable life insurance policy.
    Products of this insurance policy increase the growth potential of this policy by allowing the policyholder to opt for a bond basket of stock and money market funds to invest. The money of the policyholder grows on a tax-deferred basis.

Tasks of different types of life insurance policies have similarities as well as dissimilarities. And another fact that you should keep in your mind is that statements in the systems may have slight differences from company to another company as well as rates also may have some differences when compared between different life insurance companies.

Annuities

There are two types of annuity contracts as qualified annuity contracts and nonqualified annuity contracts, as mentioned above. Eligible annuity contracts consist of tax-deferred retirement plans or IRAs. These qualified annuity contracts fund with the pre-tax dollars. Withdrawal penalties and required minimum distribution surround the qualified annuity. Nonqualified annuity contracts fund with post-tax dollars.

However, annuity contracts ask the purchaser for substantial upfront commission fees and ask for surrender fees, which are comparatively higher. Another unique fact of annuity funds is that they are retained for nearly or more than ten years. There is a deferred tax basis growing for earnings. An essential point about annuity contracts is that they consider the longevity of one’s family thoroughly.

Conclusion

Thanks for reading our first article on Life insurance, Bookmark us for more valuable article series about life insurance from us in future.

Additionally find our latest articles for you,

Photo by Pixabay from Pexels

I'm Sam, The main writer for boostupliving.com. So basically I'm a pretty simple person who loves to write about motivation, success, net worth and many to ensure the quality of people's life.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Newsletter

Subscribe to our official newsletter for quick updates from our website.


More Content

Motivational Quotes Kanye West For Your Inspiration Motivational Quotes Kanye West For Your Inspiration
Quotes1 week ago

Motivational Quotes Kanye West For Your Inspiration

The well-known music icon, Kanye Omari West is an American rapper, music producer, songwriter, fashion designer, and businessman. He is...

A Brief Guide on Heavy Metal: How to do a Detox and Heavy Metal Testing A Brief Guide on Heavy Metal: How to do a Detox and Heavy Metal Testing
Miscellaneous3 weeks ago

A Brief Guide on Heavy Metal: How to Do a Detox and Heavy Metal Testing

Many people may not be aware of the adverse effects of heavy metals on the body, but they are one...

5 Reasons Why Meal Delivery Is So Trendy 5 Reasons Why Meal Delivery Is So Trendy
Miscellaneous1 month ago

5 Reasons Why Meal Delivery Is So Trendy

The internet has changed our lives, literally! There is no denying that we can get everything done on the internet,...

3 Reasons Why Your Dental Health Is Important 3 Reasons Why Your Dental Health Is Important
Miscellaneous1 month ago

3 Reasons Why Your Dental Health Is Important

Dental health or oral hygiene is the practice of keeping your teeth and mouth free from bacteria, decay and any...

5 Things You Can Do For the Good Of Your Mental Health 5 Things You Can Do For the Good Of Your Mental Health
Sleep Guide2 months ago

5 Things You Can Do For The Good Of Your Mental Health

Prioritizing your mental health is the best thing that you can do for yourself. In a world where people are...

Best Drake Quotes For Daily Motivation Best Drake Quotes For Daily Motivation
Quotes3 months ago

Best Drake Quotes For Daily Motivation

Who is the Drake? Who is Drake? Aubrey Drake Graham is a pretty famous Canadian rapper, vocalist, lyricist, record producer,...

The Net Worth Of Scottie Pippen- Lifestyle And The Way He Became Famous The Net Worth Of Scottie Pippen- Lifestyle And The Way He Became Famous
Net Worth4 months ago

The Net Worth Of Scottie Pippen- Lifestyle And The Way He Became Famous

Scottie Pippen is a retired American expert basketball player. The net worth of Scottie Pippen is about $20 million. Scottie...

The Net Worth of Tom Brady - The Greatest Quarterback of All Time! The Net Worth of Tom Brady - The Greatest Quarterback of All Time!
Net Worth4 months ago

The Net Worth of Tom Brady – The Greatest Quarterback of All Time!

Anyone who loves American football knows how significant a quarterback to a team is. Tom Brady is the greatest quarterback...

Net Worth of Taylor Swift – How Much is Taylor Swift Worth_ Net Worth of Taylor Swift – How Much is Taylor Swift Worth_
Net Worth4 months ago

Net Worth of Taylor Swift – How Much is Taylor Swift Worth?

Taylor Swift is an American singer and musician who has a net worth of $400 million. She was only 15...

The Net Worth Of Lil Wayne – From Youngest Rapper Of The Record Label To 10Th Richest Rapper In The World The Net Worth Of Lil Wayne – From Youngest Rapper Of The Record Label To 10Th Richest Rapper In The World
Net Worth4 months ago

The Net Worth Of Lil Wayne – From Youngest Rapper Of The Record Label To 10Th Richest Rapper In The World

You identify him right when you see those dreadlocks, body full of tattoos, and those golden teeth! It is none...

Facebook

Trending

Shares