How can I fund my life insurance policy with an annuity?

With the economy so uncertain these days, many are turning to the safety and security provided by an annuity. These insurance products can help you greatly during your retirement years by providing a fixed income for you that you cannot outlive. If you are over the age of 59 ½, you will be able to fund your term life insurance policy for the remainder of the term agreement and leave behind a larger inheritance than you could with just a term policy or an annuity. By combining these two types of insurance policies, you are going to increase the benefit left behind for your family and maximize your coverage and your income during your retirement years.

The way it works is simple. By purchasing an immediate fixed annuity, you will begin receiving payments within the first year of signing the policy. Because the annuity is fixed, you are guaranteed a certain minimum amount that you will be receiving each month, making it that much easier to budget your money. The size of your monthly distribution would be dependent on the initial premium paid and the payout structure chosen. Instead of these payments going directly to you though, you can opt to have the insurance company keep some or all of this money and use the amount given to them to pay the premium on your life insurance policy. It is in your best interest to pay the yearly premium on the term policy, if possible, because you will end up saving more money as the yearly premium is always going to be slightly lower than the total amount of monthly payments combined over the course of a year. This strategy will also allow you to receive more money from your annuity during the remaining months.

When you pass away, as long as both policies are still active, your beneficiaries will receive two payouts rather than one. Because annuities are a type of insurance, the principal investment is received by your heirs tax-free, just as a life insurance policy would be. You should be aware that any profits left over would be taxable at their current income tax rate, though. On top of this, the benefit from your life insurance policy would also be received. This combination is a good way to fund your insurance, your retirement years, and still have money left over for your heirs.

Matthew G Young – TermLifeInsurance.org Expert is a New York State licensed Life, Accident, and Health Insurance agent. He is also the author of The Complete Guide to Investing in Annuities: How to Earn High Rates of Return—Safely. Matthew currently resides in Western New York with his wife and family.