Life insurance

Life insurance serves to cover the financial needs of dependents in the absence of the family holder. It is a contract between an insurer and an insured in which the insurer guarantees the payment of a benefit to the beneficiaries in the event of a claim. The payment, in turn, is proportional to the premium paid in life by the insured. In this article we will elaborate the definition of life insurance along with its importance and types.

In this article, we will talk about the importance of life insurance and the points of attention for hiring.

Enhancement of protection

We all have that acquaintance who bought a new car and was soon involved in an accident. The fear that something similar will happen to us means that, when buying a car, contracting auto insurance is still done at the dealership.

We rightly value the protection of our property, as we know the risks involved – after all, accidents do happen.

We are aware that, by choosing to drive a car without insurance, we run the risk of having a great loss. As much as we have confidence and security when driving, we are susceptible to this type of fact.

That way, even if we don’t want to and with the desire to never use it, we prefer to pay a monthly amount to have a guarantee and not have to financially bear a tragedy.

So why don’t we do the same with our lives?

The importance of life insurance

As we mentioned, it is common to think about protecting our material goods and we end up neglecting our personal protection , claiming that contracting life insurance will only “attract” bad things and accidents.

By neglecting personal protection, we also neglect the security and financial stability of our dependents and loved ones. After all, no one wants to trigger life insurance, however, when an accident happens, protection brings relief in such a difficult time.

Why have life insurance?

The purpose of life insurance is to provide financial protection for the insured’s dependents after their death.

For this product to make sense, it is essential that the insured analyze his financial situation and determine the standard of living necessary for his dependents before taking out the insurance.

In this regard, the assistance of a financial advisor or an insurance broker is very important to verify the type of insurance that best meets your needs.

Another very important issue is the reassessment of insurance after major life events, such as the occurrence of a marriage, divorce, birth or adoption of a child or purchase of a significant asset, such as a home.

Types of life insurance

At above you understood the definition of life insurance and importance now we are describing some types of it.

There are different types of life insurance, each with its own specific characteristics. As for the number of insureds, it can be individual or collective.

Individual life insurance only insures one life. It is usually more expensive, however it can be hired with specific characteristics and peculiarities to meet the needs of the insured.

Collective life insurance, on the other hand, insures a group of people, usually being contracted by companies or associations. Despite being cheaper, it has general characteristics that apply to all policyholders.

Regardless of the number of policyholders, life insurance can be classified into three categories:

1-traditional life insurance

As the name suggests, this is the most common. When contracting this insurance, the insured assumes the commitment to pay the premium as agreed in the contract and the insurer assumes the commitment to pay the indemnity in the event of a claim.

It is possible to appoint any person as a beneficiary, regardless of their relationship with the insured, even if that person is not one of the insured’s legal heirs.

2-temporary life insurance

Temporary insurance aims to guarantee the standard of living of the insured’s dependents for a pre-established period and has a premium proportional to this need.

This type of insurance has the advantage of being cheaper and serves, for example, to guarantee the standard of living until the children graduate from college, or for some other limited period.

3-redeemable life insurance

While in the traditional case the payment of compensation only occurs in the event of an accident, the redeemable insurance allows the insured to access a part of the money according to some pre-established rules.

They are usually expensive insurance and should never be considered an investment.

4-Additional benefits

As the name implies, life insurance has as its object the insured’s own life, being, therefore, an insurance whose beneficiary is a third party, a dependent of the insured who must benefit from the insurance.

There are, however, additional benefits that are usually included in life insurance and that can even be enjoyed by the insured. Among them we can mention the following:

• Serious illness : in the case of serious or terminal illnesses, some life insurance companies pay the insured person an indemnity that can be enjoyed during life.
• Hospital income : some life insurance companies pay an additional income for each day the insured is hospitalized and unable to work.
• Accidental Death Benefit : This benefit guarantees the payment of an additional premium in case the death of the insured occurs accidentally. It exists because, unlike natural deaths – which in a way allow for a certain planning – accidental deaths can have a greater impact due to their unpredictability.

The range of coverage and benefits for insurance is huge and the definition of the best option depends on each insurer and the needs of the insured and their beneficiaries. Therefore, we always suggest carefully analyzing all coverages and, in particular, exclusions.

How to buy life insurance?

Counting on personal protection and also having your family protected costs less than you might think.

Generally, it is advantageous to have life insurance, but care must be taken when hiring , as a poorly sized policy can bring a false sense of protection.

Insurers, like other companies in the world, need to guarantee the minimum profit for the business. And this is done through statistics, that is, they perform complex calculations to arrive at the value of the financial risk they take when issuing an insurance policy.

Using a simple example, insurance for a 30-year-old will cost less than insurance for a 60-year-old, considering the age factor. But that is not all that is taken into account.

Insurers’ prerequisites for life insurance

To get a quote for life insurance is simple, just enter basic data, such as name, CPF, age and profession.

However, for the insurer to accept the insurance, it will require a little more.

To approve insurance, companies take risk into account. In addition to age, information such as BMI (body mass index), city of residence, exercise routine, whether or not you are a smoker, health status, recent surgeries and whether you use prescription drugs are requested by the insurance company to assess the insurance viability.

If any of these factors pose any danger to the insurer, it may request tests and more information to recalculate the risk.

Conclusion

Life insurance is suitable for anyone who has beneficiaries who are financially dependent, in whole or in part, on them. The loss of the provider can have a huge impact on the family’s standard of living, compounding the loss issue. If well dimensioned, a life insurance helps to reduce this risk.

We are quite confident that after reading this piece of writing you have clearly understood the definition of life insurance.