What's the difference between a "premium" (life insurance premium) and a "consideration" (annuity consideration). Aren't they the same thing?
Total Comments: 15
Posted: Fri May 22, 2009 04:20 pm Post Subject: insurance
SO.........the Annunity you would purchase just like a Life Insurance policy? Or.......after the "untimely" death of someone? I guess I'm getting a bot confused. I know Life Insurance you can have a monthly premium. Is it the same with Annunity?
Posted: Sat May 23, 2009 01:00 am Post Subject:
An annuity can be purchased anytime somebody has money.
Posted: Sat May 23, 2009 04:15 am Post Subject:
Or.......after the "untimely" death of someone?
Why would someone need annuity after death?
Okay, annuities are bought to continue earning even after the pay checks stop coming i.e. continuing income after retirement. Lemme put an example,
Suppose, you earn $X in a month and want to continue with the same lifestyle that you have now even after your retirement. Therefore, you would be needing the same $X (we aren't considering rate of inflation here) coming to you every month. An annuity would assure you that amount.
You can either buy an annuity plan with lump sum payment and start receiving annuity income immediately, or can pay regular premiums and receive the benefits sometime in the future.
Now, why we need life insurance ?
We all know the reason, right?
Posted: Wed May 27, 2009 04:48 am Post Subject:
SO.........the Annunity you would purchase just like a Life Insurance policy? Or.......after the "untimely" death of someone? I guess I'm getting a bot confused. I know Life Insurance you can have a monthly premium. Is it the same with Annunity?
NOW I see where you're coming from. Let's see if this helps clear up any confusion.
When you buy an annuity, you pay premium(s) just like you do when you buy a life insurance policy. The premiums are very similar in nature but with a different goal in mind. We'll get to that in a minute. Both have single-premium premium options, and annuities also have "flexible" and "installment" premium varieties. Flexible premium annuities have premiums that vary in terms of timing and amount, installment premiums are similar to monthly payment requirements, and single premiums are just that.
The idea of an annuity is to create an "estate" through the payment of premiums while alive to an annuity contract. The premiums will gain tax-deferred interest/gain while held in the account, with the idea of "liquidating" the estate through a series of periodic payments to the annuitant at a later date. It's nothing more than a self-funded retirement plan, similar in nature to a 401(k), SEP, Keogh, etc. It has "59 1/2 rules" and all that stuff.
Through the payment of premiums while alive and funding the annuity contract, the annuitant can structure the payments later in life to provide income that he cannot outlive.
Life insurance is meant to create an immediate estate upon death and serves many additional purposes- to pay off debt, take care of the kids, fund any number of things, taxes, funerals, medical bills, business continuation, qualified retirement plans and on and on. The main difference is this: life insurance is meant to take care of things when you die and annuities are intended to take care of you when you're alive.
While annuities have a death benefit depending on when the annuitant dies, don't confuse this death benefit with having anything to do with life insurance. Ain't the same thing.
Did this help at all? It's late and I might be babbling.
Posted: Fri May 22, 2009 04:20 pm Post Subject: insurance
SO.........the Annunity you would purchase just like a Life Insurance policy? Or.......after the "untimely" death of someone? I guess I'm getting a bot confused. I know Life Insurance you can have a monthly premium. Is it the same with Annunity?
Posted: Sat May 23, 2009 01:00 am Post Subject:
An annuity can be purchased anytime somebody has money.
Posted: Sat May 23, 2009 04:15 am Post Subject:
Or.......after the "untimely" death of someone?
Why would someone need annuity after death?
Okay, annuities are bought to continue earning even after the pay checks stop coming i.e. continuing income after retirement. Lemme put an example,
Suppose, you earn $X in a month and want to continue with the same lifestyle that you have now even after your retirement. Therefore, you would be needing the same $X (we aren't considering rate of inflation here) coming to you every month. An annuity would assure you that amount.
You can either buy an annuity plan with lump sum payment and start receiving annuity income immediately, or can pay regular premiums and receive the benefits sometime in the future.
Now, why we need life insurance ?
We all know the reason, right?
Posted: Wed May 27, 2009 04:48 am Post Subject:
SO.........the Annunity you would purchase just like a Life Insurance policy? Or.......after the "untimely" death of someone? I guess I'm getting a bot confused. I know Life Insurance you can have a monthly premium. Is it the same with Annunity?
NOW I see where you're coming from. Let's see if this helps clear up any confusion.
When you buy an annuity, you pay premium(s) just like you do when you buy a life insurance policy. The premiums are very similar in nature but with a different goal in mind. We'll get to that in a minute. Both have single-premium premium options, and annuities also have "flexible" and "installment" premium varieties. Flexible premium annuities have premiums that vary in terms of timing and amount, installment premiums are similar to monthly payment requirements, and single premiums are just that.
The idea of an annuity is to create an "estate" through the payment of premiums while alive to an annuity contract. The premiums will gain tax-deferred interest/gain while held in the account, with the idea of "liquidating" the estate through a series of periodic payments to the annuitant at a later date. It's nothing more than a self-funded retirement plan, similar in nature to a 401(k), SEP, Keogh, etc. It has "59 1/2 rules" and all that stuff.
Through the payment of premiums while alive and funding the annuity contract, the annuitant can structure the payments later in life to provide income that he cannot outlive.
Life insurance is meant to create an immediate estate upon death and serves many additional purposes- to pay off debt, take care of the kids, fund any number of things, taxes, funerals, medical bills, business continuation, qualified retirement plans and on and on. The main difference is this: life insurance is meant to take care of things when you die and annuities are intended to take care of you when you're alive.
While annuities have a death benefit depending on when the annuitant dies, don't confuse this death benefit with having anything to do with life insurance. Ain't the same thing.
Did this help at all? It's late and I might be babbling.
InsTeacher 8)
Posted: Wed May 27, 2009 08:19 am Post Subject:
Thanks InsTeacher...
It was helpful...
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