Financial services are those offered by banks and other financial entities in the financial sector. The phrase refers to mobilizing and allocating funds and encompassing all operations involved in converting savings into investments. Life insurance and annuities are two examples of such services (Alpman & Ünal, 2019). On the one hand, life insurance is a commitment between a coverage owner and an insurance provider. In this agreement, the policyholder pays a certain amount in return for a premium upon the passing of the insured individual.
Furthermore, the coverage restores the deceased’s income, allowing the grieving family to continue paying expenditures such as medical and household expenses. By purchasing this policy and naming the family as recipients, one may also generate an inheritance for their family members. Correspondingly, the program can cover any remaining bills, such as the mortgages and funeral and burial expenditures (Alpman & Ünal, 2019). Above all, life insurance may assist in providing security for life’s unpredictability since the insurance gives the family a sense of peace after a loved one has died. As a result, this insurance is a critical component of financial preparedness.
On the other hand, an annuity is an arrangement between an individual and an insurance provider. The person agrees to pay a specific amount of money or an installment of payments in exchange for regular payouts that commence either instantly or at some time in the future. There are four fundamental forms of annuities; primary fixed, instant variable, delayed fixed and postponed variable (Alpman & Ünal, 2019). These varieties are determined by when an individual wants to begin receiving repayments and how they wish their pension to grow.
Annuities are an essential aspect of financial planning since they give a source of income and tax benefits as this contributed money is levy-free. They also have no contribution restrictions and accumulate tax-deferred throughout (Alpman & Ünal, 2019). Furthermore, in the case of death, annuities provide ways for transferring money to dependents. Additional benefits include receiving an assured consistent income for the rest of one’s life and relieving the individual of the complexity of managing their finances. One may lead their lives peacefully and enjoy their retirement while their investment offers a steady income stream.
Reference
Alpman, B., & Ünal, D. (2019). Accelerating the premiums for annuities, life annuities and life insurance. Communications in Statistics – Theory and Methods, 49(7), 1665-1694. Web.