Your need for life insurance varies with your age and responsibilities. It is a very important part of financial planning. There are several reasons to purchase life insurance. You may need to replace income that would be lost with the death of a wage earner. You may want to make sure your dependents do not incur significant debt when you die. Life insurance may allow them to keep assets versus selling them to pay outstanding bills or taxes.
Consumers should consider the following factors when purchasing life insurance:
All policies are not the same. Some give coverage for your lifetime and other cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. There are two basic types of life insurance: term insurance and permanent insurance.
A thorough conversation about your individual needs helps arrive at how much insurance is appropriate.
An annuity is an insurance contract intended to provide a guaranteed income, usually after retirement, that one cannot outlive. People most often use annuities to save money for their retirement. Many use it to create an extra retirement income. Along with Social Security, pensions and military retired pay, annuities make sure you will have enough guaranteed income to pay your bills without touching long term savings and investments.
While life insurance provides financial protection against dying too soon, annuities provide financial protection against living too long. They do this by guaranteeing a stream of income for life. Some annuities also use the power of tax deferral — earnings aren't taxed until they're withdrawn — so your money can grow faster.