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Life Resources

Learn more about life insurance with these useful materials

Life Resources

Learn more about life insurance with these useful materials

June 12, 2024 // All products // annuities

Life Insurance and Annuities Simplified

There are some things in life that human beings have made more complicated than they really are. Like the recipe for croque monsieur, advanced math equations, and the differences between life insurance and annuities. 

A Recipe to Keep in Mind 

Let’s start with croque monsieur a delicious French-inspired sandwich. It’s basically a ham and cheese sandwich which is coated with an egg wash and baked or fried like French toast. The name itself translates to “crunch sir.” The name alone could sound daunting to many — except your friend who’s a foodie — but it’s still a sandwich. People complicated a sandwich to create appeal. Although taken to a tasty, new level, it’s still a ham and cheese sandwich.

You Can Do the Math

When it comes to advanced math calculations, you probably don’t need to use it in your daily life unless you’re an engineer or math professor. However, you probably do a good job of creating and following a budget and calculating expenses on a monthly basis or for long-term needs. You don’t need the complicated, advanced math to run your household or life. 

Simplifying Life Insurance and Annuities

What most people might like a little help with is understanding something they perceive is  complicated — like the difference between life insurance and annuities. This is where an experienced agent from AAA Life can be of help. Though, AAA Life and its agents do not provide legal or tax advice, they can explain the differences between the two to you. (Note: If more advanced legal and/or tax planning is needed, you should consider consulting with an independent legal, tax, or financial expert prior to the purchase of any policy.)

Both life insurance and annuities are tools that can help create a stable financial future, but with different outcomes. 

Most people purchase life insurance for the death benefit they can leave to loved ones. That means if the insured were to die while their policy is inforce, their beneficiaries would receive the benefit. This helps to ensure that those the insured person cares for most are taken care of financially in their absence. Life insurance is often purchased when the financial need is great and access to savings or emergency funds is limited. That’s often the case for young couples, new parents, or parents with growing families and growing expenses to match.

Keep in mind there are different 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 the insured’s lifetime, as long as premiums are paid when they are due, cash value will accrue and the policy holder may use it to help pay for college tuition, start a business, buy a vacation home, or other expense. It’s like taking a loan from yourself. Keep in mind, though, that the final death benefit amount would be reduced by any outstanding fees or if the debt is not yet repaid. 

Annuities are available to help you plan for your retirement by providing a steady 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) at a set amount of interest in predictable payments. The investment options for variable annuities are typically mutual funds, which have an investment component often linked to stock market, so they 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. 

Both life insurance and annuities offer benefits that can help you and your family on your long-term in the future. Keep in mind that one does not replace the other. Hopefully, like that sandwich we mentioned earlier, we simplified life insurance and annuities. To learn more or get information about whether life insurance or an annuity might work best for you, talk with an experienced AAA Life agent at (888) 422-7020. If more advanced legal and/or tax planning is needed, you should consider consulting with an independent legal, tax, or financial expert prior to the purchase of any policy.


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