While both are insurance contracts, they manage opposite risks. Life insurance protects against "mortality risk" (dying too soon), creating an estate for heirs. An annuity protects against "longevity risk" (living too long), preventing you from outliving your assets. An annuity is essentially a "personal pension" where you pay premiums to an insurer in exchange for a guaranteed income stream, subsidized by "mortality credits" from the risk pool.

A deferred annuity has two distinct lifecycles. The Accumulation Phase is the growth period where funds grow tax-deferred and you retain access to the cash value (subject to surrender charges). The Annuitization Phase occurs if you choose to convert that cash value into an irrevocable stream of income payments. Note: Many modern annuities allow you to receive lifetime income via "riders" without ever entering the formal Annuitization Phase, thus keeping your access to principal.

Annuities are not FDIC-insured. Instead, they are backed by the "claims-paying ability" of the issuing insurance company. As a safety net, every state operates a Guaranty Association. If an insurer becomes insolvent, this association typically covers up to $250,000 in present value of annuity benefits per individual (limits vary by state). This makes checking an insurer's financial strength rating (e.g., AM Best) a critical due diligence step.

A "Period Certain" payout guarantees income for a specific timeframe (e.g., 10, 15, or 20 years) regardless of whether the annuitant lives or dies. If the annuitant passes away during year 3 of a 10-year period certain, the beneficiary receives the remaining 7 years of payments. This contrasts with "Life Only" payouts, which cease immediately upon death but typically offer higher monthly checks.

Yes. Non-qualified annuities can be owned jointly, typically by spouses. In a "Joint with Rights of Survivorship" (JTWROS) structure, if one owner dies, the surviving owner automatically retains full ownership of the contract without it passing through probate. However, for tax-qualified annuities (like IRAs), ownership must be singular (Individual Retirement Account).

A Return of Premium rider is a safety feature often available on Fixed and Fixed Index Annuities. It guarantees that, even if you surrender the policy early during the penalty period, you will receive at least the original premium paid, minus any prior withdrawals. This provides a "liquidity rip-cord" for consumers concerned about locking up funds, though it may slightly reduce the credited interest rate.