Personal and family peace of mind is based on financial security that allows us to solve the problems that arise in the event of any unexpected event. Knowing that the family will have that financial support justifies why you should take out life insurance. We will review what life insurance is and the different types of life insurance available, highlighting the convenience of each of them and the importance of taking out insurance in a timely manner.
What is a insurance of life?
Life insurance or life policy is a savings and protection product for loved ones, relatives or close friends, in the event of the death of the insured. They allow the payment of a premium that is stipulated at the time of establishing the policy, in the event of the death of the insured, or a state of total or permanent disability is evidenced that puts the survivors in danger or economic risk.
In life insurance, the sum insured is set between the parties at the time of the contract, which is made freely and voluntarily between the policyholder and the insurer.
Why take out life insurance?
An extensive debate can arise on why taking out life insurance is convenient. This policy represents a guarantee of peace of mind when facing difficult situations, such as the death of a family member or their disability, as this is the insured person. Among the benefits of contracting a life policy, the following stand out:
- Compensation translates into protection and care for the family.
- It allows covering the debts of the insured, preventing them from being a burden for the surviving group; mainly, funeral expenses, inheritance taxes, etc.
- It allows covering family expenses, such as food, clothing, rent, mortgage, etc.
- It guarantees the future of the survivors, allowing them to cover academic expenses.
- It represents an important economic aid in the absence of the insured.
What are the types of life insurance that are quoted in the market?
There are basically three types of life insurance, very well explained in this infographic on life insurance. All three cover the needs of the insured and their family group or beneficiary, but with certain differences, namely:
- Ordinary life insurance is the most common. The policy can be contracted at any time and raises the payment of an annual premium. The compensation is canceled when the death of the insured occurs.
- Endowment insurance guarantees an economic benefit for the beneficiaries of the policy and is not subject to the death of the insured. In some cases, it implies the payment of money if the insured survives the term of coverage of the policy. It may vary in each case.
- Temporary insurance is when a life policy is contract for a certain period of time. It can be renew or extend in time according to what is require. The premium is determined based on the age and chances of death of the insured. They cover the risk of death before the end of the contract.
Term or permanent life insurance, which one is right for you?
When you are offer or looking for life insurance, most of the time you have no idea which one is right for you. But if you make a comparison between term and permanent life insurance, you will surely be able to draw your own conclusion and be prepare to make the best choice.
Term life insurance is the simplest of all, since you only have to worry about choosing the amount of coverage and the number of years you want to keep the policy. Which can be from 1 year to 30 years. When the term expires, you will have to choose between renewing the policy. Changing it or simply letting it expire and be left without that protection. It’s ideal if you only need protection for a certain amount of time. Such as when your children are young or while you’re paying off your home mortgage. So when that important period of protection for your loved ones has passed. You can decide not to renew the insurance and save yourself the payment of premiums.
Continue obtaining protection
If what you are looking for is to continue obtaining protection. Even when you already have your own assets to provide constant economic protection to your family until the moment of your retirement or during your golden years. Permanent life insurance is the ideal for you. Since it does not expire within a specific period of time. Of course as long as payments and policy specifications are meet.
It also offers you a very interesting savings function that will depend on the type of permanent insurance you choose, the insurer and the conditions of the policy. These can be traditional permanent, variable, universal or universal-variable. You choose the one that best suits you.
The savings associate with the insurance works as follows: since the insurance is permanent, that is, it does not have to be renew every so often (as is the case with term insurance). The insurer obtains an average of the price of the policy (since premiums could be very expensive when the insure is already very old), to arrive at a premium amount. That is actually above what the insurance costs when the person is young.
Then that portion that is overcharge must be invest in the name of the insure. Must be available to him as a loan for when he needs it. It is worth clarifying that this savings is available only to the insure and not to their beneficiaries. Since the latter can only have the amount of the insurance, once the insure dies.