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I affirm the previous answers. Term Life Insurance is pure life insurance that pays, to the designated beneficiary, an amount equal to the face amount of the policy, when the insured dies. An annuity is not life insurance, at all. An annuity is a basic savings or investment plan, sponsored by a life insurance company that allows the Owner, while living, to 1) accumulate money (the accumulation phase), and 2) withdraw money, through a) (typically systematic) distributions, or b) annuitization (the distribution phase). When money is taken from the annuity policy, by distribution, the owner of the annuity contract maintains the responsibility, or risk, that the money will run out, but when the contract is "annuitized," and money is taken out in calculated installments, the life insurance company assumes the risk, because when the contract is "annuitized," the life insurance company guarantees that payments will continue so long as the annuitant lives. Many modern-day annuity contracts also offer other living benefits. Annuitization, however, has its disadvantages, as the annuitant (owner) surrenders rights of control of the money to the insurance company. Regarding income taxation, income earned on money accumulated in an annuity is tax deferred, which means that all of the the earnings are taxed at the annuitant's/taxpayer's ordinary income tax rates in effect at the time of the distributions (distributions are not necessarily 33% tax-free). Money is not accumulated in a term life insurance policy, as opposed to a whole life insurance policy, including universal life insurance and variable life insurance. Phil www ...

by phillipfostercpa

2 years ago

Asker's Rating: 

annuity protects you if you live to long life insurance protects those you love if you die to soon That is the simple way to look at it. An annuity is a scheduled payout for a given amount of money. For example: you give them $100,000 they will pay you $1000 a month until you die. If you die next month they only paid $1000, if you die 24 months from now they have paid out $240,000. You can not outlive your money. That is just an example, those numbers are not real and that is the basic version but shows what the annuity is meant to do. The term life policy says you pay the insurance company a premium and they will promise to pay your beneficiaries an amount id you die before the end of the term. You pay them $14 a month and they give your husband $100,000 when you die.

by PJ- 2 years ago

An annuity isn't life insurance - it's a monthly payout to you, until you die. Any money left over in the pot can go to a beneficiary - but there isn't any money guaranteed to be leftover. Life insurance, including term life, you don't see any money - all of it goes to your beneficiary, but it's ALL going to be there.

by mbrcatz17- 2 years ago

a term life policy covers the risk of early death,and an annuity policy covers the risk of living too long. in term life policy the claim is made ( Lump sum is paid) to the nominee in case of insured person dies. in annuity policy...the accumulated amount is paid to the policy holder in instalments ( like pensions ) benefits in case of term life policy are tax free,whereas benefits in case of annuity policy..........only 33% of the amount is tax free and the rest is taxable

by sunny- 2 years ago

the life insurance company guarantees that payments will continue so long as the annuitant lives. Many modern-day annuity contracts also offer other living benefits.

by dinesh j- 2 years ago