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Life insurance and annuities

Who needs life insurance?

Life insurance protects your family by replacing income if you die prematurely. Some policies also accumulate cash and pay distributions during your lifetime.

In most cases, you need life insurance only if someone depends on you for support.

These groups often do not need life insurance:

  • Single people, unless they are single parents or support someone such as an elderly parent.
  • Working couples without children or parents who depend on them, particularly if the surviving spouse makes enough money to pay bills and debts without exhausting savings
  • Older people whose children are grown and independent. A well-planned savings program should decrease the family’s need for life insurance as wage earners approach retirement age.

Note: Families (including single-parent households) usually need life insurance. The younger the children, the greater the need for life insurance.


An insurance company bases your premium on the type and amount of insurance you buy and your chance of death while the policy is in effect. Your age, gender, smoking habits, and medical condition are factors. Other factors include the company’s agent commissions and overhead.

If a company determines that you have an above-average risk of death, shop before paying a higher rate. Other companies may classify you differently.


An annuity is an insurance contract typically used in retirement planning. It is designed to protect you from outliving your assets. You pay premiums into the annuity and the insurer promises to pay out money to you or a beneficiary in a series of payments.

An annuity is not a savings account. An annuity should be purchased to reach long-term financial goals. Most annuities have surrender or withdrawal charges to discourage people from taking money out or ending (surrendering) the contract before retirement.

Updated on October 10, 2022
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