How life, disability, and annuities actually work.
Term covers a period of dependence. Disability replaces income you are still expecting. Permanent life is for a need that outlives a term. An annuity is about a stream of income.
Four questions before you buy anything.
Someone dies and the paycheck stops. Someone is alive and cannot work. Someone reaches retirement and needs income to last. Pick the risk first. The product comes after.
Mortgage, tuition, food, a business note, or a retirement paycheck. Write the monthly gap. Life, disability, and annuities are all priced against that number, not against a multiple of salary.
Group life, group disability, Social Security, a pension, an old policy, cash that can actually be spent. Subtract those. You are buying the leftover gap.
Death is life insurance. Cannot work is disability. Income that has to last is an annuity. If more than one risk is real, size each gap on its own. Do not use one policy to pretend it does all three jobs.
What each one is actually built to do.
Pays a death benefit so a household or a business can keep going. Term does that for a set number of years. Permanent does it for life, and some versions hold cash value. Size it to the paycheck and the years someone depends on it.
Replaces earnings you are still expecting if you cannot work. The definition of “disabled” in the policy is the whole product. Price this before you stack more life.
Turns a lump of money into a stream of income. What changes from one annuity to the next is what is guaranteed, how interest is credited, and how you take money out.
What the premium is standing in front of.
Made-up households, so the gap is visible. Not quotes. Not tied to any carrier.
Life
The hole
- Mortgage remaining
- $420,000
- Childcare and school still ahead
- $180,000
- Retirement savings that still have to happen
- $80,000
- Cash they would actually use
- −$80,000
- Gap
- $600,000
A 20-year, $600,000 term is what stands in front of that gap in this example. Hypothetical preferred-class premium: about $450 a year, or $9,000 if they paid all 20 years. The surviving earner does not have to cover the $600,000 from the remaining paycheck.
Mistake: buying $1,000,000 because it is a round number, or buying 30 years because 20 felt short.
Disability
The hole
- Monthly income that has to continue
- $20,000
- Group LTD that actually pays (taxable, capped)
- −$8,000
- Gap
- $12,000 a month
A long-term disability policy is what stands in front of that gap while the person is alive. Hypothetical individual coverage on the leftover $12,000. Group coverage is often any-occupation after a short period, capped, taxable when the employer pays the premium, and gone when the job ends.
Mistake: buying more term life instead of filling this monthly hole first.
Annuities
The hole
- Money meant to become income later
- $500,000
- Income wanted from it
- $2,500 a month
- Years they may need that income
- 25+
An annuity is what turns that lump into a stream of income. What matters in this example is what is guaranteed, how interest is credited, and how many years it costs to leave.
Mistake: reading the illustrated column and skipping the surrender schedule.
Last reviewed August 2026. Figures are illustrative rather than sourced pricing.
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This tool prices life insurance across multiple insurers. It is not a recommendation. I am a licensed Texas agent and I may be paid if you buy.
Three questions, answered shortly.
Size it to the hole: debts that would remain, years someone still depends on that paycheck, savings that will not happen if the earner is gone, minus cash they would actually use. A round million is not a method. A 20-year term is only the right length if the dependence lasts about that long.