Life Insurance Question Virginia VA

Reader’s Question:

We are from Virginia and we have been considering investing in life insurance or an annuity. Can you help me sort this out? They seem to have similarities. What are the differences?

Geoff

Richmond VA

Good day, Geoff,

There are similarities. You are correct. It is safe to say that both annuities and life insurance serve purposes that would enhance any long-term portfolio. Annuities and life insurance both offer death benefits. How you view the importance of the death benefit may help you determine which program better serves your purpose.

Life insurance is usually for the purpose of the owner’s loved ones. In the event of an untimely death, the beneficiaries receive a tax free death benefit. This amount is guaranteed when the policy is purchased. While annuities generally provide a death benefit, they also provide income for the owner. An annuity is a tax-deferred method of growing your investment that provides lifetime income.

Deferred annuities and immediate annuities are the two central investment programs. As implied by their names, there are differing income and tax benefits to these products.

Term Life and whole life are the common life insurance programs. With term life, you are purchasing a death benefit and building no cash value. With whole life, you are investing in a death benefit program that builds cash value and in many cases offers dividends.

Geoff, your Virginia insurance agent will be able to help you shape an annuity – life insurance strategy that best suits your goals and benefits your loved ones. These are rewarding considerations. With that note, I’d say good luck planning your future.