The reason you might purchase life insurance instead of an annuity depends on what you're trying to accomplish - what your goal is for your insurance or annuity plan.
Annuities provide cash while
you are still living, while life insurance provides cash to the beneficiary upon death of the insured person.
So, annuity can provide you with cash, while life insurance can provide your beneficiary with cash at some future time.
With
life insurance, you're paying a regular premium until the death of the
insured person, or until you no longer want or need the life insurance policy. In exchange for the premiums you pay, the life insurance carrier agrees to pay out the face amount death benefit, should the
insured die during the life of the life insurance policy.
With
annuities, you're paying a large sum of money (if single-premium annuity) or
periodic payments (flexible premium periodic payment annuities) in exchange for
the return of monthly payments with interest over a given time frame (various
options). There are several different payment plans to choose from with an annuity, so you can choose how you wish to receive the money in the future.
Life
insurance may be a good option if you're looking to pay off debts, provide money to pay estate taxes, so your family is not stuck with these bills upon your death.
An annuity may be a good option if you're looking to help plan for your
retirement income.
You may want to review your options with an investment advisor and consider all tax implications before purchasing your life insurance and annuities.
