Annuities and Life Insurance Policies

Know the difference between two important financial plans.

Living comfortably after retirement is everyone’s dream; not having to worry about saving money and finally being able to relax. Retirement Planning is the only way you can guarantee you get to live your perfect retirement. Part of this plan is being able to provide for any dependents in the event that the planner passes away earlier than expected. What if they live longer than expected and need a way to pay for their daily lives?

Also, don’t forget, as you get older, medical expenses begin to be more prevalent. The Medicare system can often be difficult to navigate and, in some cases, doesn’t provide the proper care you need. Many retirees seek assistance from life insurance or annuity policies to help with medical expenses and those needed for daily life.

Through annuities and life insurance policies, you can assure yourself and your family that they will be taken care of.

Annuity vs Life Insurance

Both life insurance policies and annuities are ways to invest money that grows tax-deferred. The thing about the plans is that they act almost completely opposite of each other, so before you can choose which retirement income plan is right for you, it’s good to understand the differences between the two.

Life Insurance

A life insurance policy will assure that any dependents are financially taken care of in the event that the policyholder dies sooner than he or she expected. These plans can be either a term-life or whole life insurance plan.

In a term-life insurance plan, the policy only covers a predetermined time period, usually 10, 20, or more years. A whole life insurance plan covers the holder’s entire life. Many term-life insurance plans have the option to be converted into a whole life plan if the plan expires.

Some life insurance policies also offer cash value and income earning options. Many even offer other living benefits like critical care coverage. Although some policies offer these kinds of advantages, the main goal of life insurance is to take care of dependents in the event of the policyholder’s death.

Another type of policy, a variable life insurance policy, can increase potential growth by allowing you to choose the investment in a basket of stock, bond, and money market funds. This plan also increases your risk.


While a life insurance policy exists to make sure a dependent has money if the policyholder passes away, an annuity exists if the policyholder lives longer than expected. Though living longer than expected seems like everyone’s goal, what happens when the money you saved for your retirement runs out?

An annuity provides retirement income to the plan owner. The savings are tax-deferred for the policyholder. The annuity does have death benefits for beneficiaries, but it’s not tax-free. There are three different kinds of annuity policies:

Deferred Annuity

This type of annuity gives the plan owner the income after the premiums are paid, which could take several years. Within this plan, there are fixed, fixed indexed, and variable annuities. The differences in the plans are how interest is earned and whether the owner wants to make a safe investment or is looking for greater accumulation value potential and market-like returns.

Immediate Annuity

An immediate annuity will begin to pay the plan holder the benefits no later than one year after they have paid the premium to the insurance company. Most of these plans are paid in one payment. This plan is for those hoping to have a guaranteed income for life.

Longevity Annuity

A longevity annuity plan can be thought of as an extra pension plan that can be used when an original retirement plan’s payouts have declined or stopped. This plan is a fixed income plan that can be issued at any age with income that is deferred up to 45 years. In most scenarios, this plan kicks in when the holder is 80 years of age or older.

How to Choose

Both life insurance plans and annuities should be considered in your retirement and financial planning. While both include death benefits, it’s important to consider why you are thinking of getting these plans. Looking at your own goals is the best way to choose whether a life insurance or an annuity would work best.

If you want income for your retirement, an annuity would probably work best. An annuity is tax-deferred savings and great for retirement income. This plan helps those who live longer than expected while a life insurance policy does the opposite. If you have your retirement income covered, a life insurance policy would make the most sense. The life insurance policy protects your loved ones from an unexpected death.

If you need guidance, Alpen Partners is here to help.

Where We Come In

Like many, you may be struggling to decide which of the two plans works best for you. Experts at Alpen Partners can evaluate your current financial plans, investments, savings, and your financial goals to help you decide which makes more sense for you.

Not only can we assist you in making that decision, Alpen Partners can guide you in where to find the best policies.

Alpen Partners is partnering with Switzerland’s leading insurance broker to offer its clients various insurance products. These solutions seek to optimize the client’s position with respect to investments, asset protection, and estate planning while being fully tax-compliant in the country of residence of the client.

Life insurances have always been favored as a tax efficient investment vehicle for clients of high-tax regions such as Western Europe and Scandinavia. More and more clients choose to invest in life insurance products and other annuities in order to protect their assets against creditors and to structure their estate planning. Finding the right product in the right jurisdiction is essential and is the focus of our advisory work in this area.

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