Life insurance provides coverage in the event of death and, often these days, includes a terminal illness benefit for payment of part of the death benefit on the diagnosis of a terminal illness. Policies with cash value are available but most contemporary life insurance policies are written as risk only to minimise the premium. Adequate planning of the amount of risk and the appropriate ownership of the policy is essential to ensure that the right money ends up in the right hands at the right time.
With an immediate annuity the income component of the regular payment is taxed in your hands at the investor’s own tax rate. The part that represents a return on capital is not taxed.