Prices Increasing Soon
Staying well-versed about how life insurance and annuities work makes it simpler to come up with financial planning that is customized as per your needs.
#All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply
By clicking on "View plans" you agree to our Privacy Policy and Terms of use
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
Understanding your financial goals well before reaching the age of retirement makes it easier to meet your life objectives once you are closer to retirement. Both annuities and life insurance should always be considered in your long tenure financial planning. Both offer death benefits and you buy life insurance for a situation if you die early whereas annuity if you live too long. In order to make your selection easy, let’s discuss the difference between an annuity and life insurance:
Life insurance is an agreement/contract between an insurer and a policyholder, where the company promises to pay an amount in exchange for a premium, on the policyholder’s death or after a set period. In case of death of the life assured, the death benefits are paid to the beneficiary that acts as a cushion against the financial stress. The beneficiaries are your dear ones but can be one individual, multiple people, or even an organization or other company.
The two main types of life insurance policies are:
Term Life Insurance: Term Insurance is a type of life insurance policy where the insurance company provides coverage for a specific ‘term’ in exchange for a fixed premium paid over a time period. If the policyholder dies during the policy term stated in the policy, a death benefit is paid to his/her family.
Note: Now that you know that what is term life insurance plan you can easily buy a term plan for your loved ones.
Note: You can easily calculate the term plan premium by using the term insurance premium calculator online tool.
Note: You should also check the term insurance benefits if you are planning to purchase the term insurance plan.
Whole Life Insurance: It is a policy that covers you for your entire life or up to 99 years. The death benefit is paid in case of the policyholder’s death.
An annuity is an agreement you buy that guarantees you will get a specified sum of money each month for the remaining years of your life. These plans are specifically designed to help protect individuals as they age by creating a consistent stream of income they can depend on throughout their life. People usually capitalize a lump sum amount and in exchange receive a monthly payout.
The two main types of Annuities are:
Immediate Annuity: It is insurance in which you start receiving payments as soon as the first investment is made. When you pay a specific amount of money to your insurer and the company will provide you with a regular payment for a given time period and in most cases as long as you live. If you are nearing your retirement age, then this is the type of plan you should go for. Deferred annuity accrues money while immediate annuity pays money.
Deferred Annuity: It is a contract that generates income for retirement years. In exchange for recurring or one-time deposits held for at least 1 year, an annuity insurer offers repayments of your investment along with some return amount.
The shared features or the similarities between the plans might lead you to use both the terms alternatively. However, you need to learn the significant differences between the two terms. So you can accordingly plan your financial ride and you know what exactly you want. Let’s look at some of the differences between annuity and life insurance plans.
| Annuity Plans | Life Insurance |
| These plans are used for income protection for spouse and self | Life insurance is for the protection of loved ones/dependents and helps meet a future financial objective |
| An annuity plan can be deferred plan for some years after the investment period | Life cover cannot be deferred |
| Work only until you or your partner is alive | The feature of protection only works after your unfortunate death |
| These plans also carry a small life cover also | Life insurance plans usually do not lead to an annuity |
| Payouts are taxable | Maturity or partial payout can be fully exempted from tax |
| Most annuity plans work as a legacy policy if there is an unused amount. | Whole life insurance plan only act as a legacy plan |
| Death benefit rider is optional | The policy offers a death benefit |
| Premium is based on the life expectancy of the policyholder | Premiums are based on the policyholder’s mortality |
| Ensures income for you and your loved ones for the rest of your life | Ensures income for the beneficiary if the policyholder dies |
As discussed, both these plans are long-term financial plans. A life insurance plan offers financial protection to your loved ones in case of your demise, while an annuity provides protection against outliving your assets. The similarities between annuities and life insurance are as follows:
Both are protection and long term investment plans
They can offer tax-protected and inflation growth
Long term safest investment
Annuity plans sometimes carry a life cover
The key to assessing which plan is the right choice for you- annuity or life insurance – is to check out your purpose of buying it.
Life insurance is a smart option if your purpose is to help and protect your dependents and other beneficiaries to pay for your last bills or expenses. On the other hand, if you want to buy a plan that provides you a retirement income then you should consider annuity plans. The annuity plan offers tax savings and regular income for retirement.
In simple words, Life insurance policies protect your family if you die prematurely while the annuity plan protects your income if you survive longer than expected.
If you are trying to choose between an annuity and a life insurance plan, think about your objective for purchasing the plan. In order to make your selection easy, we have also discussed the difference between annuity and life insurance. If you want to protect and support your dependents financially after your demise, a life insurance plan might be the right option for you. And if you are looking out for extra retirement income, an annuity might be the ideal option.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
Life insurance fraud is a financial crime that can be committed
Read more
High net worth individuals often opt for life insurance plans to
Read more
“Policy Bazaar insurance clarified the term policy for me, so
Read more
“I recently bought an HDFC term plan and it is the best
Read more
The life insurance policy in India is a type of life insurance
Read moreInsurance
Calculators
Payment Methods
Secured With
Follow us on
