Life insurance and annuity products do more than merely protect individuals and families from unforeseen circumstances. They also provide the opportunity for investment growth as well as control over assets through the identification of specific beneficiaries who will receive the proceeds of these products.

Life insurance is an agreement between you (the insured) and an insurer to make premium payments in exchange for a promise to pay a certain sum to someone (usually named beneficiaries) upon your death. Its purpose is to provide some form of income replacement to your beneficiaries after your death. The size of your policy should be re-evaluated on a regular basis as your family grows and as household income needs increase to ensure that your spouse and children have adequate income to continue a comfortable lifestyle. Life insurance can also provide mortgage protection so that the balance of a mortgage can be paid off with life insurance proceeds. If a parent should die before they have had the chance to fully fund their child's education, life insurance can also be used to replace the income that would have been saved for that purpose. As the costs of education are increasing at a significant rate, you should review your protection regularly in order to ensure that it covers the duration of a university education.

Life insurance proceeds can also be used to pay off any debts you may leave behind, funeral expenses and estate taxes, leaving all your other assets intact for your family to use. Life insurance can even provide a means of making a donation to charity after your death. "Cash value policies" allow you to take out a loan against the cash value you have built up in the policy. If you happen to die before you have finished paying back the loan with interest, the balance owing will be deducted from the proceeds of the death benefit. While life insurance only pays out upon your death, an annuity is a two-stage retirement planning tool ideal for building a "nest egg". A pure annuity is an investment account you set up with a life insurance company. Premiums are paid which generate interest, known as "accumulation". When your annuity matures you can withdraw money (i.e. receive annuity benefits) from the account, "annuitization". Life insurance premiums get more expensive as you get older. But with annuities, the older you get the less expensive they become and the higher the rate of return. Also, with annuities you have the option of receiving payments either during your life or after your death. However, the death benefit is not like those found in life insurance policies. If you die before you annuitize, your beneficiaries will receive either the current value of your annuity or the amount you have paid into it, whichever is greater. For instance, if you die when your investments are performing poorly and the value of your account is less than what you have paid in, your beneficiary will receive the amount you paid in not the current value. Without a survivor benefit option you will receive annuity benefits until your death. It is possible that you may die while relatively young, so the insurance company will give you a higher rate of return than ordinary savings accounts or certificates of deposit to compensate for the probability of your early death. If you have a survivor benefit option then your spouse or other beneficiaries will be entitled to receive annuity benefits after your death. In this case, the insurance company will eliminate any compensation for the probability of your early death giving you a lower rate of return than annuities with a survivor benefit option. Surrendering an annuity within the policy's first five to seven years will result in surrender fees, which differ by individual policy. The fee will drop for each year you are in the policy, for example you may pay an eight per cent surrender fee if you surrender in the first year, seven per cent in the second year and so on. It is worth checking your policy as there may be other charges involved, including penalty fees for early withdrawal.

Life insurance and annuity products are two of the many insurance tools used to achieve the multiple goals of investment appreciation, asset protection and tax planning.

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Attorney Janine Ratteray is a member of the Company Department of Appleby Spurling & Kempe. Copies of Ms. Ratteray's columns can be obtained on the Appleby Spurling & Kempe web site at www.ask.bm.

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This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.