When hiring a Life policy, as well as to sign any other insurance, it is important to have clear questions such as what is Life insurance, Types of Life Insurance, what they cover, who hires it and where.
What is a insurance of life?
Life policies are part of the insurance denominated for people and consist of the payment of a previously stipulated premium to be able to receive in case of death or disability an amount that supposes the lack of income of the insured .
The amount of the premium that the insured faces depends on the risk and the monetary amount that he wants to receive in case of disability or that his beneficiaries receive in the case of his death. In addition, this final compensation of the policy can be received in a single payment or as an income, as desired by the insured or its beneficiaries.
There are 2 main modalities in Life insurance, those that cover in case of death and those that do in case of life. In addition, the combination of both results in mixed insurance.
- Death insurance, also called Life Risk insurance.
- Life insurance, called Life Insurance Savings.
In addition, within them it is possible to choose to assume investment risks by varying the amount to be received from financial market fluctuations or not taking risks and availing themselves of a fixed return.
Types of Life Insurance
The choice between Life Savings or Life Risk insurance will depend on the purpose the insured wishes for his policy. Thus, the first one is contracted to obtain a return on the premiums paid, while with the second the beneficiary receives the stipulated capital when the policyholder dies.
Life Insurance Risk
Life insurance in case of death is called Life Risk, and the function of its coverage is that the beneficiary of the policy receives the capital stipulated therein when the policyholder dies. Therefore, unlike other insurances such as Health , in the case of Life Risk, the policyholder and the beneficiary are not the same person.
This policy can be hired in 2 modalities: whole or temporary life .
Whole life insurance
The whole life mode consists of the payment of the capital designated in the policy right after the death of the insured, regardless of when this occurs . In addition, within it you can choose between lifetime or temporary premiums. With the first payment is made during the life of the insured, while with temporary premiums the payment is made for a number of agreed years or until his death if it arrives before the policy expires.
Temporary life insurance
These Life insurance cover the risk of death for a specific period of time and stipulated in the policy . This type is the one that is contracted for loan repayment. For example, the insured dies and had a mortgage pending, the insurance covers the outstanding amounts.
The obligation that the insurer acquires after the signature comes to an end at the time of expiration of the contract and the company does not have to make any disbursement to the beneficiary if the death does not occur during the term of the contract.
In this modality there is no possibility of a rescue benefit, but they can be convertible or renewed annually with the payment of the premium to temporarily extend the insurance coverage.
Life Insurance Savings
Life Savings insurance is also called in case of life , and with its hiring the beneficiary, who in this case is usually the policyholder himself, will receive the capital if he lives when the policy expiration date arrives. It consists of paying premiums that grant the insured profitability , an investment that although offers low interest compared to other savings products presents a reduced risk. However, their tax advantage is that they are not taxed on the profitability obtained but only on the collection thereof.
These policies can be contracted as Unit Link, Insured Pension Plans (PPA) or Individual Systematic Savings Plans (PIAS) and usually subscribe to complement retirement income, although this is not their only function.
Mixed Life Insurance
On the other hand, some insurance companies offer mixed life insurance, which guarantees the payment of capital to the beneficiaries of the policy in the event of the insured’s death. They can also pay it to the policyholder in the event that the insurance expires, the insured continues alive. At present, most of the Life Savings insurance contracted are of this modality, since they incorporate a death or disability capital into the pure characteristics of a savings policy.
Who hires Life insurance?
There is a certain tendency to take out Life insurance when you are already old, although its importance and benefits not only focus on that range, in fact hiring it when you are young has advantages . During 2005, more than half of the new contractors of these policies were between 25 and 44 years old, a trend that remained a few years later but in 2013 became between 35 and 44 years old . The characteristic that prevails over time is that of people who have relatives dependent on them and who intend to hire this insurance product to guarantee their well-being if something happens to them.
Protecting family members and the insured himself for what may happen to him are just some of the reasons why you should take out Life insurance , but it is also done to cover the mortgage.
Life and mortgage insurance
When signing a mortgage, banks usually link it to the contracting of Life or Home insurance . That is why the first positions in the list of companies with which guarantees of this type are contracted are held by banks. However, although the subscription obligation is imposed by them, the user can decide whether to contract it with his bank or go to the insurer he wishes.
Life insurance with death coverage that is contracted when acquiring such a loan fulfils an economic mission.
Take out life insurance
Choosing which Life insurance to hire can be a copious task, but the needs of each user will determine which one is best for each one. This policy can give you many benefits, especially the security that your relatives will be protected in the event something happened to you . When you go to hire it, take into account all the coverage and exclusions of the policy and be honest in the questionnaire that the insurer will perform on your state of health so that it is correct and the insurer compensates you or your beneficiary in the event of an accident.