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What You Need To Consider Before Purchasing Life Insurance Annuity

Have you considered purchasing Life insurance annuity but are unsure of all the facts you need to make a good decision? Have you thought about securing your financial position for the future but do not know where to start? You are not alone! Hundreds of people search for information on life insurance annuity every week.

Life Insurance Annuity

Life insurance annuity is basically a contract between a policy holder (the insured) and a life insurance annuity company (the insurer), where an amount of money is initially paid to the life insurance annuity company (or sometimes over an extended period of time) by the insured, in exchange for the value of the policy or regular payments, at a later stage (i.e. at your retirement).

There is no doubting that by investing in a life insurance annuity now can be an awesome way to safely save (tax free) money for future a date. However, you need to be aware of the benefits and perhaps more importantly, the disadvantages of life insurance annuities, to ensure that this type of investment suits your needs.

Benefits of Life Insurance Annuity

Perhaps the biggest and the best benefit of buying a life insurance annuity is that all of the money in your life insurance annuity will continue to grow because it is a tax-deferred investment and you are not paying taxes when accumulating your funds!

It always pays to do your research because most life insurance annuity companies have hefty penalties and taxes there are for early withdrawals.

What about Annuity Tax? What do I Need to Know?

Annuity tax can be a real issue. There are some hidden tax-traps that you need to know about before investing in a life insurance annuity. While annuities are tax free when they are in the accumulation period, did you know that once you begin receiving payments, your gains are taxed at your normal income tax rate?

Before you consider whether an annuity is right for you, you should be aware of any other types of annuity tax that you may have to pay. Are you aware of the annuity tax you will need to pay? Be sure to ask your potential life insurance annuity company for full details of any taxes and penalties.

It is also vital to know that when adding your earnings from an annuity (which on their own may fall in a lower tax bracket) to the existing income of the recipient can sometimes push the recipient’s earnings into a higher tax bracket, and it can make you wonder whether it is really worth it in the first place.

Getting an Annuity Quote

You can get an annuity quote in one of three ways:

  • In person,
  • On the phone, or
  • Online.

In each case, you will need to give the life insurance annuity company certain information about yourself and your finances so that they can tell you which of their packages would best suit your needs.

If you are uncomfortable giving details of your financial position over the phone or via the internet, you should arrange an appointment in person to get your personalized annuity quote.

Always remember that the representatives of the life insurance annuity companies are sales people and therefore may not have your best interests at heart. Some insurers work on a commission based salary and therefore they may just want to make a sale. So make sure that you always double check all of the information you are given and compare it with other companies for better deals.