What is a retirement annuity?
Annuity is an insurance contract that provides a stable income in retirement age. You can buy a pension annuity in a lump sum payment, or you make istalments to an insurance company for several decades. Despite the fact there are many varieties of this service, fixed retirement annuities, variable annuities and indexed retirement annuities are most common among the Americans.
Fixed RA implies fixed income from retirement until the end of life of the service owner. Variable RA allows the LIC client to choose the investments that determine the interest rate and person's future pension. Indexed RA allows get income tied to various stock exchange indices.
Conservative and inexperienced investors tend to buy fixed annuities. Financially educated people prefer the other two products.
Pros and Cons of Annuities
Retirement annuities (RA) allow you to plan your life for decades to come and guarantee income.
The high cost of annuities is their biggest drawback. Besides, retirement annuities are often bought through brokers who receive 10% of the contract. Some LICs charge customers fee after people start receiving pension.
What is life insurance?
Life insurance is a contract that provides a lump sum payment to the policy beneficiaries after the client’s decease. There are two common types of life insurance: term life insurance and permanent life insurance. The term of insurance offers a contract for a certain period of time - it can be 10, 20 or 30 years. Permanent insurance offers cover for the person’s whole life. A big advantage of this service is that these policies are not taxed, but insurers can impose sanctions on customers if they do not make timely payments.
Source: https://finance.yahoo.com/news/annuities-vs-life-insurance-key-161944046.html
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