Norton Seal
Web_Mother and daughter having a conversation about life insurance

Annuity vs. Life Insurance: What You Should Know

What’s the difference between life insurance and annuities? It’s a common question. If you wonder what it takes to secure a financial future for yourself and those you love, it may be one you find yourself asking. And that’s a very good thing.

The bottom line: life insurance can help provide your loved ones with the financial peace of mind they deserve if you were to pass away. Annuities provide a tax-deferred way to grow money and provide an income stream. Both should be considered as part of a long-term financial plan.

Although both share some similarities, the overall purpose of each is very different. Let’s take a quick look.

Life Insurance Helps Protect Their Financial Future

When comparing life insurance and annuities, the biggest difference is that life insurance is designed to help protect against a financial loss for others after your death. Annuities on the other hand help protect you financially while you’re still alive.

Life Insurance helps to financially secure your loved ones’ future, since the death benefit can help with things like replacing your income and meeting important financial needs such as:

  • Funeral costs
  • Daily living expenses
  • Mortgage payments
  • College funding

When you purchase life insurance, you aren’t purchasing it for you — it’s really a purchase for the people you want to take care of.

If you want to find the right life insurance for you and your loved ones, American Family Life Insurance Company has the customized options you're looking for. If you want to learn even more life insurance, read up on the specifics of how life insurance works.

Annuities Help Prepare You for the Future

Think of an annuity as a tool that could help meet your retirement needs. The primary purpose of annuities is to create income for you, and this can be done in a few different ways. You can set up payments that last for your entire life, a specific period of time or a combination of both.

There are many potential benefits of annuities. Some include:

  • The ability to grow account value on a tax-deferred basis
  • The potential for a future income stream that can’t be outlived
  • The possibility of a lump sum benefit that can be paid to a surviving spouse

How do annuities work?

You can buy an annuity by giving your insurance company either a single lump sum or making payments over time. The insurance company then invests your money — referred to as a premium or purchase payment — in different ways depending on the type of annuity you select.

You can buy an annuity that begins making payments back to you right away — this is called an immediate annuity — or if you prefer, annuities are available that delay making payments to you for an extended period, sometimes many years.

Start Planning for the Future Today

Life insurance and annuities work in tandem to protect a future for yourself and those you care for. Now that you have a high-level overview, discuss with your agent how these options fit your needs.


Annuities are long-term insurance contracts intended for retirement planning. Annuities are issued by Protective Life Insurance Company located in Nashville, TN, with administrative offices at 2801 Highway 280 South, Birmingham, AL 35223, through a relationship with American Family Brokerage, Inc., 6000 American Parkway, Madison, WI  53783.


How would you rate this article?

Related Topics: Buying Life Insurance , Term Life , Whole Life