What is a life insurance policy and what is it for?

As has already been mentioned, life insurance is protection products offered by insurance companies with the aim of serving as a form of economic income for the beneficiaries of a person after his death.

As human beings we do not have the power to predict the events that may occur. Sadly, death is one of them. Due to the pain that the loss of a person supposes, it is often difficult for us to talk about the subject and leave things in order for those who will suffer the most from our departure: our family members.

The life insurance is one of those tools that we employ to ensure that, in our absence, the quality of life of our loved ones will not worsen for a certain time. Thus, it guarantees you the power to pay for your children’s studies, cancel a mortgage loan, the amortization of other loans contracted, and more.

The amount of the insurance will depend on the contributions made by the policyholder. The longer and more money you have been paying to the insurer, the greater the amount that the beneficiary can claim.

As a curious fact and according to the Spanish Union of Insurance and Reinsurance Entities ( UNESPA ), each year, the insurance liquidates about 4,700 mortgages after a death. For its part, the report “Fate, at the worst moment” prepared by Somos Seguros shows that the amount paid by insurers to balance family situations resulting from an unexpected death is around 166 million euros.

Life policies have a fairly simple operation. We can say that the insured pays in exchange for the fact that, if he dies or something happens to him that prevents him from working and generating income for the maintenance of his family, the insurance company pays compensation to the beneficiaries of the policy for an amount previously agreed in the contract. . In case of disability, the money can be received by the insured himself.

As for hiring, the process is simple: you will sign a contract with the insurance company as the owner. In said agreement, the company undertakes to pay the beneficiaries the amount of money stipulated in the contract when any of the previously established contingencies occur.

Most people think that life insurance is ideal only for people who have dependents or children. Nothing is further from reality!

Imagine that you lead an independent lifestyle and that, due to life circumstances, you are completely or permanently unable to work and continue to face your financial responsibilities. Well, in these cases, life insurance would also allow you to have financial support.

This is why there is no specific age to take out life insurance, although most people decide to subscribe this type of policy from the age of 30, motivated by the acquisition of financial responsibilities or by the desire to start a family. In any case, making this decision will depend, mainly, on the particular circumstances of each person.

What is certain is that after 50, life insurance complements very well with other types of insurance for organizing the years of old age so that you can enjoy them calmly and without worries.

But regardless of this, it is true that the importance of life insurance is not in doubt to guarantee your peace of mind, especially in the following situations:

  • Age 35 is the average age at which we form a family, which represents one more compelling reason to consider investing in comprehensive life insurance, especially if the other members depend or will depend on you financially. In other words, if the illness or death of the person who financially supports the family represents a danger to the family finances, life insurance becomes a necessity. 
  • It is even more advisable to purchase mortgage insurance when you commit to paying a mortgage because in the event of death your family will not only lose your salary but will also have to face a long-term debt. 

The most basic coverage of life insurance is death, however, it also serves to cover other types of risks such as temporary or permanent disability, partial or absolute disability and death from special causes (accident or serious illness).

In the case of death coverage, which is the best known to all, an insurance would mainly cover burial expenses and death capital, which is nothing more than the amount of money that the beneficiaries will receive in the event that the insured pass away.

In general, insurance companies offer different types of life insurance but in general terms, we can group them into three broad categories:

They protect your family against risks that can generate economic damage. For example, before the death of a family member, they cover burial expenses, they also protect the children from being orphaned by accident and before other circumstances such as absolute permanent disability, disability by accident, death by traffic accident, serious illness, among other. 
It is ideal for the self-employed. If your family and your business depend 100% on you, this is the appropriate insurance to give financial peace of mind to your loved ones in the event of an unexpected event.
If you have mortgages, this is your right policy. It consists of protecting your family members against possible bank debts.

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