Main reason for buying it
Pays out when
Typical form of payment
Buyer’s age when it is typically bought
Accumulates money tax-deferred?
Pays a death benefit?
Are benefits taxable income when received?
Life Insurance
Term life
Provide income for dependents
You die
Single sum
25-50
No
Yes
No
Whole life
Provide income for dependents or meet estate planning needs
You die, borrow the cash value or surrender the policy
Single sum
30-60
Yes
Yes
No, unless a cash value withdrawal exceeds the sum of premiums
Annuities
Deferred annuities
To accumulate money in a tax-deferred product
You make withdrawals
Single sum or income
40-65
Yes
Yes
Yes, but only the part derived from investment income
Immediate annuities
To assure you don’t “outlive your income”
One period after you buy the annuity, stops paying when you die*
Lifetime income
55-80
Yes, but only in the early payout years
*payments continue if the annuity has a guaranteed-period option that hasn’t expired at the annuitant’s death
Yes, but only the part derived from investment income