Annuity vs Life Insurance: Which One Do I Need?

I’m in the middle of looking at retirement options and I’m not really sure I understand the difference between annuities and Life Insurance. Which one is the best option for my retirement?

Question asked by Shanice Halsey
Compare Top 10 Annuity Rates
 
Takes approx. 60 seconds
Pension Fund
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327334
Our in-house Experts are here to provide Whole of Market Advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at
Smoker

Answered by Alicia Hempsted

Annuity vs Life Insurance: Which One Do I Need?

Sometimes people mistake annuities and Life Insurance for each other, which is concerning once you realise how very different these products are. Annuities and Life Insurance are effectively the polar opposite of each other.

 

What’s the Difference Between Annuities and Life Insurance?

A Life Insurance policy will pay out a lump sum to your loved ones after your death or upon diagnosis of a terminal illness. Upon taking out cover, you will need to pay monthly premiums to your insurer throughout the term of your policy until you claim or until the policy’s term ends.

An annuity and Life Insurance policy will provide completely different types of cover for you and your loved ones.

The payout of a Life Insurance policy can be equal to thousands of pounds, with some people insuring themselves for the cost of their mortgage.

This lump sum can be claimed by your loved ones when you die or if you are diagnosed with a terminal illness with less than 12 months to live.

An annuity on the other hand, is a product that provides you with regular income throughout your retirement. An annuity works in reverse compared to a Life Insurance policy. Taking out an annuity requires you to pay a lump sum upfront in order to receive monthly payments later on.

Buying an annuity requires you to exchange some or all of your current savings in your pension pot for a guaranteed, regular income for the rest of your life. When you die, most types of annuity will stop paying income. This means that if you die early you may not see all of your capital returned. But, if you live longer, you may end up getting more out of your annuity than you put in.

 

Do I Need an Annuity or Life Insurance Policy?

An annuity is one option to provide you with a retirement income. From it you will receive regular income that you can use to fund your retirement. A lifetime annuity will continue to pay out until you die, so you don’t have to worry about being without income.

On the other hand, if you would like to leave some money to your loved ones, then you will need a Life Insurance policy.

The lump sum paid out to your family after your death can be used to pay off debts, cover funeral costs, or keep their finances afloat if they relied on your income.

If you need some advice on which products you need, feel free to contact us on 📞 01273646484.

Annuity
 
Life Insurance
 
Pensions Advice
 
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
Compare Top 10 UK Insurers
  Takes approx. 60 seconds
 - 
Need help? 
Call us on 

Frequently Asked Pensions Advice Questions

 
Could you explain to me what the annual allowance is and what it means for my pension? Also, I’ve...
 
I’m almost 55 and have a final salary pension. I’ve read the articles about the new pension...
 
I have a protected rights pension from the past and another one I’m currently paying into. I’m...
 
Is there a tax allowance for personal pensions like with gross income? How much am I allowed to contribute...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Chris Wade
18/03/2019

Provided excellent, in-depth advice on the income protection market and researched the market thoroughly to find cover which suited my needs.

Charlotte Traoake
14/03/2019

Exceptional service from Oliver Wigdor! In less than 24 hours after our initial phone call discussing life insurance I now have a policy in place. The call was conducted with the utmost professionalism especially when handling the sensitive personal questions. Thanks again will be recommending to friends and family!

Christian Sawyer
05/03/2019

I have used Victoria before who is always very efficient and very experienced. Her professionalism is worthy of very high regard.

We are rated 4.9/5 based on 2097 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.92 / 5 Average
2097 Reviews
D Roberts
Overall Rating
Just had income protection set up by Victoria Slade @ Dewberry. I get medically assessed annually in my profession and illness could potentially put me out of work. Victoria helped me find a great product with British Friendly which has given me peace of mind. Victoria has been very professional and thorough throughout the process and has been a pleasure to deal with.
L Harman
Overall Rating
Jake provided clear and concise information in a way that was easy to understand. He took time to ensure the right product was found to suit our requirements and he was helpful and friendly in the process.
L Peniston
Overall Rating
Really easy process setting up my income protection insurance and Jake explained everything in great detail so i understood all options to make an informed choice. Wouldn't hesitate going to him again - highly recommend Drewberry.
C T
Overall Rating
Exceptional service from Oliver Wigdor!! In less than 24 hours after our initial phone call discussing life insurance I now have a policy in place. The relief of having protection should the unthinkable happen, providing security for my son. The call was conducted with the upmost professionalism especially when handling the sensitive personal questions. Thanks again will be recommending to friends and family!
D hezelgrave
Overall Rating
Excellent