Both life insurance and annuities are financial tools that can help create a stable financial future, but they help you achieve somewhat different goals.

Most people purchase life insurance for its death benefit. That means if you were to die during the length of your policy, your beneficiaries will receive the benefit. This helps to ensure that your loved ones are taken care of financially in your absence.
  

  
WHAT IS LIFE INSURANCE?
Life insurance is often purchased when the financial need is great and your savings or access to backup funds is limited. That’s often the case for young couples, new parents, and parents with growing families and growing expenses to match.

Keep in mind there are several types of life insurance. Term life insurance offers coverage for a specific period of time, or “term,” often 10 to 30 years. Whole life insurance is in place throughout your lifetime, as long as you pay the premiums when they are due. People may use the cash value to help pay for college tuition, start a business, buy a vacation home, or as a permanent financial tool. It often has a cash accumulation feature that you can tap into if you need to (Keep in mind, though, that the final death benefit amount would reflect any fees and debt taken out and not yet repaid.). Typically, with term and permanent forms of life insurance, the beneficiaries generally receive the death benefit tax free.*
  

  
WHAT IS AN ANNUITY?
An annuity is also there to help you plan for your financial future, but is often used to provide a guaranteed income stream over a given period of time – typically the life of the person who bought the annuity. This can be a good tool to use in retirement, so you don’t outlive your income.

Keep in mind that there are two different types of annuities - fixed or variable. Fixed annuities, for example, typically guarantee that you will receive your principal (what you paid in) and a set amount of interest in predictable payments. Variable annuities, which have an investment component often linked to equities markets, do not generally offer the same income guarantees, given market fluctuations. However, they may offer the potential of greater gains (or losses). Some annuities may also include a death benefit that pays a beneficiary a predetermined amount.

This is just a very general glimpse at annuities, which feature a range of possibilities to help meet your retirement goals with provisions that can vary with from contract to contract. It’s important to get professional advice about annuities and how they can help you meet your financial goals.
  

  
THE BOTTOM LINE
Both life insurance and annuities offer benefits that can help you and your family on your long-term financial path, but keep in mind that one does not replace the other. An insurance professional can sit down with you to discuss your specific financial situation.

*AAA Life and its agents do not provide legal or tax advice. Therefore, you may wish to consult independent legal, tax, or financial advice prior to the purchase of this policy.