How well do you understand life insurance and annuities? Take this quick quiz to test your knowledge.
(1) True or False: Life insurance has one purpose only: to provide your beneficiaries with financial protection should you die prematurely.
(2) True or False: Term life insurance does not provide a policy cash value that grows over time.
(3) True or False: An annuity can offer tax-deferred growth and guaranteed lifetime income.
(1) False. There are several types of life insurance, and some provide other benefits. You can find out about different benefits of life insurance policies here.
(2) True. Term life insurance provides a death benefit for a fixed number of years, but not the cash value accumulation feature commonly associated with a permanent life insurance policy. Because the death benefit protection is for a limited period, term life insurance premiums are often the lowest of all types of life insurance policies. However, after the level term period, premiums can go up significantly and increase annually if you choose to renew the policy. Consider choosing a term policy that gives you the option to convert to a permanent policy.
(3) True. To learn how annuities work, and to download a tip sheet which can help you decide which one might be right for you, check out this page.