Have you ever wondered what life insurance covers? Life insurance is personal insurance that basically covers the risk of death but also allows different modalities that, in addition to expanding coverage, can turn them into excellent savings and investment products.
But focusing on the most universal purpose of what Eye med life insurance covers, the fundamental guarantee of life insurance is death from any cause. The insurer undertakes to pay the capital stipulated in the policy in the event of the death of the insured. This occurs regardless of the cause and only takes into account the exclusions stipulated in the contract.
Aegon offers a solution for you and your family so that you feel calm.
Main life insurance coverage
With life insurance, it is possible to guarantee the stability of income in a family in the event of disability or death. As we said, life insurance covers in case of death of the insured, but not only that. Life insurance coverages go beyond this main coverage. Many policies include complimentary guarantees, which can be very interesting both for the specific needs of the insured person and to have greater peace of mind for us and our family.
When we ask what life insurance covers, the essential and basic coverage is death. This is the common factor for all life policies. Funeral expenses are usually included in this coverage and the capital that the beneficiaries will receive will depend on the conditions that have been contracted. The causes of death are also contemplated in the policies if it is due to natural death, illness, or accident.
Permanent and absolute disability
Life insurance covers permanent and absolute disability, derived from physical or mental illness, which prevents the performance of professional activity. It is a very important guarantee since in this circumstance, on the one hand, lower incomes tend to come together (the pension for these assumptions usually suppose a very important reduction in the monthly remuneration) at the same time that expenses increase due to the greater care required.
Life insurance covers the event that the insured person suffers from a serious illness, such as breast or prostate cancer, diagnosed after contracting the insurance. Receiving capital to cover these needs is a very important help to face a complicated situation and from which important expenses are derived.
Life insurance also helps us with the advance payment of expenses, of all kinds. From those derived from if the death occurs abroad, such as for the payment of inheritance tax. It should not be forgotten that the receipt of money by the beneficiaries of life insurance as a result of the death of the insured person is subject to Inheritance and Gift Tax.
The amount received by the beneficiary must be accumulated to the value of the assets and rights that are part of his share in the inheritance. And the insurance entities cannot make the payment of the policy effective if it is not justified to have presented the corresponding documentation for liquidation or to have already self-assessed the tax.
In the case of a traffic accident, we are guaranteed coverage for any death, but the problem is multiplied if our spouse dies in it and he does not have his own life insurance. Including this type of coverage is very economical (involves a minimal increase in the premium) and provides us with additional peace of mind.
Other additional life insurance coverage
After the death, the relatives find themselves with the problem of facing a difficult situation at the same time that they are required to carry out a whole series of complicated procedures (certificates, pension processing, taxes…). Receiving help both personally (psychological treatment) and professionally (help or advice on pending procedures) is a very important point to assess when hiring our life insurance.
Analyzing the cost and coverage will allow us to configure our insurance according to our needs.
We must not forget that good life insurance covers a contingency as important as disability and, therefore, the beneficiaries of the economic benefits are ourselves, the policyholders. Economic benefits in these circumstances are even more important. For all these reasons, life insurance is fundamental in all circumstances as we explain. Having adequate financial protection in case of disability is essential for two reasons: having more expenses and having a significant reduction in income.
For the first point, having a disability, although it will depend on the degree determined by the Tr, multiplies the medical and assistance expenses, especially if the care or help of a third person is required. It should also be added that these expenses can be very long-term, so that, even if they involve small extra monthly payments, their overall cost can be very high.
By the second point, income is drastically reduced. Although there are differences in the economic benefits in the case of absolute permanent disability and severe disability, they are all calculated according to your contribution bases and with maximum limits that in most cases entail a significant decrease in income.
Importance of life insurance for self-employed
This fall is especially important in one of the groups, that of the self-employed. The majority of self-employed workers (85% according to the latest calculations) contribute to the minimum base, so a pension for absolute permanent disability, in which 100% of the contribution base is collected, this amount will be slightly above 900 euros currently. All this when current expenses do not decrease.
How does life insurance work?
Here’s how life insurance works, depending on how we prefer to be covered:
Risk Life Insurance
It is the traditional life insurance in which the beneficiaries are offered economic coverage in the event of death. In this way, the beneficiary would receive a capital that has been set in advance when the insured has signed the policy. Here you can find two different modes:
- Whole life insurance offers the payment of compensation immediately after the death of the insured.
- The temporary life insurance will cover the risk of death during a specific period of time, which is stipulated in the policy, and after which the protection will cease to have an effect.
Life Insurance with Savings
Life insurance with savings is a different life insurance model, but one that has grown a lot in recent years. In savings life insurance, the survival of the insured person guarantees that he/she will receive the capital contributed plus the agreed interest if he/she lives when the policy expires.
It could really be compared, to bring the idea closer, to a deposit that also includes life coverage for the beneficiaries in the event of death during the duration of the deposit. This type of insurance is increasingly used not only as a protection tool but also as a retirement savings product.
Also keep in mind that in some cases you can access insurance offers in which the coverage is doubled in the event of death by accident, or simply due to a diagnosis of an illness that makes you incapable of exercising your profession. in the future.
Finally, when it comes to understanding how life insurance works, it should be noted that in some cases mixed or personalized formulas can be offered.
Who are the beneficiaries of your life insurance?
Life insurance will allow you to freely choose those people who are beneficiaries of your insurance. In other words, you can be the one who determines which people the compensation is directed towards in case you have to activate it. This, which the insurer itself provides you with, makes the decision fall on you and of course, you must assess who is the appropriate beneficiary accordingly.
What is the insured amount in life insurance?
When we consider what life insurance covers, it is key to take into account what is the insured amount that is being included in said insurance. In some cases, these amounts are preset on different scales and, logically, are directly related to the cost of the policy: the higher the level of protection, the higher the cost of the life policy.
The best way to determine what you really need is to calculate what would happen during a certain period of time if your income stopped reaching your family, either due to death or disability. This calculation can help you when choosing the insured amount that you really need.
Generally, there is a tendency to assess issues such as being able to settle the rest of the mortgage costs and current loans at the time of signing the policy, as well as a certain period of time equivalent to the salary you earn. This period of time can range from three years to five years. But remember, each person is different and so is each family’s need for protection. You must determine yours.
The price of life insurance
The price of life insurance is in line with everything that we have previously reviewed. Today insurance companies offer life policies at very affordable prices, and also with really flexible payment mechanisms in general.
The point is that many people continue to see life insurance as an expense, and perhaps they should start to see it in another way, as an investment. Unfortunately, many things, good and bad, can happen throughout our lives, keeping our family’s future safe regardless of what happens is a value worth investing in. Above all, because they are not large amounts, on the contrary, it can be ensured that one day any family economy can access adequate life insurance.
When to take out life insurance?
And if hiring him encourages something to happen… Although it seems strange, this is a reason that, although it is often difficult to recognize, worries many consumers. As we discussed in the previous point, it is difficult to get this thought out of the heads of the people to whom it appears. The reality is that this cause-effect does not exist and if we play with probabilities and possibilities, it is more likely that misfortune occurs naturally than said misfortune occurs motivated by the hiring of insurance. Therefore, to prevent it is better to prevent it from happening naturally than to prevent it from happening by talking about it.
At what age is it more convenient to take out life insurance?
Many people do not think about it when considering that they are still young. Youth makes life insurance cheaper and the benefits that can be obtained from it are greater, since generally the younger you are, the harsher the consequences of the possible misfortune.
Does it make sense to take out life insurance if I don’t have a family?
Life insurance not only covers relatives, but it also covers the impossibility of carrying out work that may arise for oneself. There are many who associate life insurance with a product to protect you when you have family responsibilities, such as a spouse or children. Nothing is further from reality. Although it is true that one of the objectives is to guarantee the economic well-being of those we love most, this objective is compatible with what should be the main one, our own protection and that of our heritage.
Hiring life insurance, as we have seen, helps us plan our future and that of the people we love most, and the sooner we start our investment, the cheaper it will be and the greater benefits we can obtain from it.