How do annuities differ from life insurance?

Life insurance is designed to provide a financial benefit to beneficiaries upon the death of the insured individual, typically through a lump sum payment. This payment helps to cover expenses, debts, or provide ongoing financial support to dependents. The primary purpose of life insurance is to protect loved ones financially in the event of an untimely death.

On the other hand, annuities serve a different purpose. They are designed as long-term financial products that provide a steady income stream, often during retirement. Annuities are purchased as a way to accumulate funds over time, which can then be disbursed back to the annuitant in various forms, such as monthly payments over a specified period or for the lifetime of the individual.

While both life insurance and annuities deal with financial risk related to life events, their structures and objectives differ significantly. Life insurance focuses on providing a financial safety net upon death, whereas annuities are primarily investment vehicles aimed at generating income over time.