Although they are both sold by life insurance companies, annuities and life insurance are two different products serving two different needs. Life insurance is intended to pay the full dollar amount of the policy at the time of the insured's death, whenever that may occur.
An annuity uses the accumulated value of the policy to provide a guaranteed income stream, typically at some point in the future. As an example, if you have a $100,000 life insurance policy and you die, the insurance company will pay the beneficiary of the policy $100,000. If, however, you purchase an annuity and pay say twelve monthly installments and then die, the insurance company will pay your beneficiary the value of the twelve installment payments, plus whatever interest these funds may have earned, minus the up front charges to issue the policy. This might easily produe a difference of $100,000 versus $1,000. In short, annuities are not a substitute for life insurance and vice versa.
An annuity is almost like the opposite of life insurance. It continues to pay you a stream of income until you pass away. Life insurance on the other hand pays out to your beneficiaries once you pass on.
There are two types of annuities the fixed and the variable annuities. An annuity is a kind of retirement plan that will pay a regular income to the retiree for their lifetime. And it provides tax deferred growth which is their key marketing elements.
The difference between annuity and life insurance lies in the benefits and the timing of it. Since annuity intends to support the investor's future income requirements while in life insurance, meets the need of the beneficiaries.
The two basic types of annuities are the deferred and the immediate. In a deferred annuity, the money you have is invested for the period of time until you are ready to begin a withdrawal which is typically during retirement and it accumulates money and you can also be converted into immediate annuities if you want. While the immediate annuity is you begin to receive payments soon after you make your initial investment (usually within 30 days)
If you care and want to protect your love ones, then you have to choose the best plan for you and them. Choose wisely and with some knowledge regarding insurances and insurance companies. Be sure to purchase your insurance or annuity from a reputable insurance company with at least an "A" excellent AM Best rating (this means they have a good financial status).