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What is a Life Insurance Annuity?

Life insurance has always been regarded as a form of a protection against the unexpected death of the insured and not as an investment opportunity that has the potential to pay off. You may be surprised that there are a couple of good reasons to consider life insurance worth investing especially for retirement purposes and your beneficiaries are taken cared of by life insurance annuity.

The popular type of life insurance includes whole life, variable life and term life. Part of the premium in a whole life or variable life insurance policies go into an investment fund and pay off life insurance annuity. Variable life insurance is characterized with a flexible cash value and death benefits. The flexibility of the variable life insurance annuity is subject to the performance of the investments that the fund covers. It follows the investment structure common to money market and traditional stock accounts. Since it does not guarantee fixed income funds, variable life insurance guarantees coverage in spite of market trends. The policy will identify a minimum amount of life insurance annuity even if the said investment is not doing well in the market. This provision helps the insured realized that at least, a minimum return on the policy will be realized. One of its advantages also is that, the high returns on the value of the life insurance are not subject to tax until cash value earnings are actually withdrawn. Unlike in stocks and bonds, tax is applied at the time earnings are realized. Many people prefer this type of life insurance because it gives them the leverage to choose what type of investment they prefer and they are in control of everything where their money is going.

One feature of this variable life insurance policy is that, regardless of the health condition of the insured, the policy is going to remain in effect for the life of the policy holder. The insured can also take out some amount from the fund in a form of a loan and use it for some contingencies. Others are forced to cash out their life insurance to settle bills or health care costs in exchange for the loss of coverage for their loved one in the event of death. If the insured die, the beneficiary will receive the benefit equal to the face value of the policy, in addition to the death benefits. Death benefits are designed to help the beneficiaries support themselves to get on their feet and be independent. Death benefits may come in periodic payments known as life insurance annuity; in a monthly basis or can be claimed in a lump sum. Beneficiaries should also be aware that death benefits are also taxable, so it would wise to consult an accountant or attorney regarding the potential tax liability.

Being protected and knowing that when uncertainty strikes, life insurance annuity can be a great help to your loved ones. It can give them a fresh start and sustain them for a period of time until they are ready to face the world again without you by their side.