How Does An Annuity Differ From Life Insurance? 
Both annuities and life insurance are provided by life insurance companies , and there are a number of differences between the 2 products . For one thing to purchase an annuity does n't require any underwriting such as medical questions or exam . Annuities are a way to liquidate an estate while life insurance is a way to create an estate . There are different types of life insurance and not all , -LRB- Term -RRB- , have or gain any cash value . Whole life insurance does have cash value and can be accessed by the owner , but does n't have to be . Annuities must have their cash value distributed after the accumulation period and the distributions are taxed as income , where the cash value of a whole life policy may be borrowed without paying tax on it . And the death benefit is paid to the beneficiary income tax free . 