What benefit is shared by both an annuity contract and a life insurance policy?

Both an annuity contract and a life insurance policy offer the benefit that cash value accumulation is tax-deferred. This means that any growth in cash value within the policy — whether from premiums paid towards a life insurance policy or from investment earnings within an annuity — is not subject to income tax until the funds are withdrawn or paid out. This tax-deferral feature is particularly advantageous for policyholders as it allows their investments to grow without immediate tax implications, enabling potentially larger amounts to accumulate over time.

While the other options may seem appealing, they do not apply uniformly to both an annuity and a life insurance policy. For instance, guarantees of returns often pertain only to specific types of annuities and may not apply to all life insurance policies. Interest accumulation might occur in both products, but it is not a core benefit shared between them in the same manner. Fixed premiums may apply to certain life insurance contracts but do not uniformly apply to all annuities, which can have variable premium structures depending on the type and terms of the contract. Thus, the tax-deferred cash value accumulation stands out as a common and significant benefit shared by both financial products.