Financial planning for your future can be difficult, especially when saving and enjoying your retirement. Majority of people also have families to take into consideration, you want to be sure that your family is well taken care of and will not be left with any of your financial burdens in the event of your death. There are two financial planning resources that you can take a look at: life insurance and annuities. These are both important options to consider when planning your finances.
The basic idea behind life insurance is that by having it your family will not be burdened by financial problems upon the death of a loved one. When you take out a life insurance policy, you are making a contract with your insurance company for a set amount of money to be provided to your beneficiary in the event of your death. You pay a premium to cover your policy, which has been chosen by you.The two main types of life insurance policies are a protection policy and an investment policy. A protection policy provides benefits in the case of death, often ad a lump sum. Protection policies are considered term policies; they do not accumulate value. An investment policy grows in value, it is often referred to as permanent life insurance. An investment policy stays active until it matures, it grows in value over time. This reduces the risk to the insurer and gives the policy holder the chance to access the funds.
An annuity is an insurance product that is more commonly used by people who want to ensure that they will have a continuous income after retirement. Like life insurance, the policy holder will make payments towards an annuity but they also get the opportunity to decide for how long they will get the payments back. Contracts for annuities are usually provided by insurance companies. Like a savings account, an annuity will collect interest, but federal income taxes are deferred during the accumulation phase and will be due when you start collecting payments.
There are two types of annuities, a deferred annuity and an immediate annuity. A deferred annuity has a later payout date, like retirement for example. An immediate annuity begins paying you soon after you start investing. Both types of annuities can be fixed or variable, some will even allow you to name a beneficiary who can continue to receive payments after death.