As a person ages, they have more to think about in terms of financial protection for both themselves and their families.
Thank you for reading this post, don't forget to subscribe!Should a health crisis or accident occur that would put their life at risk, having a plan for continued financial stability is essential. While these considerations may be stressful, it is important to find an insurance provider you trust to work through all of your options.
There are two overarching categories to consider for adults looking for lifelong protection: annuities, and life insurance. Each category has its own specific options. This article will offer the basics of each of these terms, as well as insight to help you determine which is best for your situation.
Annuities: the basics
Many older adults worry that they will not have enough funding to support them as they approach retirement age. Annuities are one possible answer to this concern – by making an annuity contract with an insurance company and paying them a certain amount, a person ensures a financial payout later down the line when they may need it. For many, the promise of future installments is enough peace of mind to invest in an annuity when they are younger.
There are two main types of annuities:
- Immediate annuities are purchased with a lump sum and the return comes relatively soon – usually within one year of initial purchase.
- Deferred annuities are usually purchased over an extended period of time using multiple payments, and return payments begin at a set future date.
Life insurance plan options
As an alternative to annuities, life insurance is historically the more popular investment (although annuity contracts have been on the rise in recent years). Life insurance plans protect a policyholder’s financial dependents, should the policyholder pass away. There are two main categories of life insurance plans:
- Term life insurance is the simplest plan type, promising a financial “death benefit” to dependents in the event of the policyholder’s passing.
- Permanent life insurance (or cash value insurance) provides a similar death benefit, with the addition of an optional savings option. Types of permanent life insurance include whole life insurance, and universal life insurance.
Comparing and contrasting
Annuities and life insurance plans have some similarities and differences, and addressing these will help you understand which is right for you and your family.
Those with annuities face surrender fees if they withdraw from their account earlier than what is stated in their contract. Therefore, these funds aren’t easily accessible for a certain period of time – after which the holder will receive a consistent payout. Most of the fees paid to purchase an annuity occur earlier on, which makes it a smart option for those who are anticipating old age. These individuals can finance their accounts earlier on without having as many concerns about making payments down the road when doing so becomes more difficult.
As for life insurance policies – especially permanent life insurance – there are also steep fees involved. However, those who take the time to allow growth in their cash value accounts will see a return on their investment in the form of financial protection for their surviving loved ones.
The biggest difference between life insurance and annuities is that, while annuities offer protection to individuals who will need the extra support as they age, life insurance is most often purchased for the protection of others in the family. A person’s decision depends on their goals and expectations about the future.
Whether you decide to invest in an annuity or a life insurance plan, it’s essential to find a trustworthy insurance provider to guide you through the application process. Those living in Pennsylvania can rely on PA Auto Insurance Outlet to deliver practical advice, no matter your choice of life protection. Our staff is ready to answer any question you may have about life insurance, annuities, and more. We also offer affordable auto insurance packages, as well as helpful and convenient auto tags services. Set up a consultation with us today!