How Does Cash Value Life Insurance Work: Life insurance is the provider of protection against the death and disability of more than 30 million Spaniards. A third of them have it contracted individually, and the rest as collective insurance hired by their company or for several members of the same family. It is an insurance product that is very widespread due to the help it represents for relatives and relatives when the policyholder dies or becomes disabled, especially when they depend directly on their income or are linked to a loan of any kind.
How Does Cash Value Life Insurance Work
- Life insurance can be contracted to cover the death of the policyholder or for him to obtain a return on his money.
- There are 2 types of Life insurance: Life Savings and Life Risk.
At the time of contracting a life policy, as well as to subscribe any other insurance, it is important to have clear questions such as what life insurance is, what types exist, what they cover, who contracts it and where.
What is the insurance of life?
Life policies are part of the insurances called 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 covers the lack of income of the insured.
The amount of the premium that the insured faces depend 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, that 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 within Life insurance, those that cover in case of death and those that do it in case of life. In addition, the combination of both results in mixed insurance.
- Insurance for death case also called Life Risk Insurance.
- Insurance in case of life, 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 the fluctuations of the financial markets or by not taking risks and availing oneself of a fixed return.
Types of Life insurance
The choice between a Life Savings or Life Risk insurance will depend on the purpose that 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 for death is the so-called Life Risk, and the function of its coverage is that the beneficiary of the policy receives the capital stipulated in it when the policyholder dies. Therefore, unlike in other insurance such as Health, in the case of Life Risk, the policyholder and the beneficiary are not the same people.
This policy can be contracted in 2 modalities: whole or temporary life.
The whole life mode consists of the payment of the capital designated in the policy just after the death of the insured, regardless of when this takes place. In addition, within it, you can choose between life or temporary bonuses. With the former, the payment is made during the life of the insured, while with the temporary premiums the payment is made during a number of years agreed or until his death if it arrives before the expiration of the policy.
Temporary Life Insurance
Life insurance covers the risk of death during a specific period of time and stipulated in the policy. This type is the one contracted for the repayment of loans. 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 expiration of the contract and the company does not have to make any disbursement to the beneficiary if death does not occur during the term of the contract.
In this modality, there is no possibility of redemption, but they can be converted or renewed annually with the payment of the premium to temporarily expand the insurance coverage.
Life Insurance Savings
Life Savings insurance is also called in the case of life, and with its hiring, the beneficiary, which in this case is usually the policyholder himself, will receive the capital if he lives when the policy expires. It consists of paying premiums that grant the insured profitability, an investment that although offers low interest compared to other savings products present a reduced risk. However, their fiscal advantage is that they do not pay for the profitability obtained, but only for the collection thereof.
These policies can be contracted as Unit Link, Plans of Insured Forecast (PPA) or Individual Plans of Systematic Saving (PIAS) and usually subscribe to complement the retirement income, although this is not its 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 death of the insured. They can also be paid to the policyholder in the event that the insurance expires, the insured remains alive. Currently, the majority of Life Savings insurance contracted are of this modality, since they incorporate a pure death or disability capital into the pure characteristics of a savings policy.
Who contracts life insurance?
There is a certain tendency to contract life insurance when you are old enough, although its importance and benefits not only focus on that range, in fact hiring it when you are young has advantages. During the year 2005 more than half of the new contractors of these policies were between 25 and 44 years old, a trend that was maintained a few years later but that in 2013 happened to be between 35 and 44 years.
The characteristic that prevails over time is that of people who have family members who are dependent on them and who seek to guarantee their well-being if something happens to them by hiring this insurance product.
Protecting family members and the insured person for what may happen to them are just some of the reasons why it is convenient to take out life insurance, but it is also done to cover the mortgage.
Life and mortgages insurance
When subscribing a mortgage, banks usually link it to the hiring of Life or Home insurance. That is why the first positions of the list of companies with which guarantees of this type are contracted are occupied by banking entities. 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 of his choice.
Life insurance with death coverage that is contracted when acquiring a loan of this type is an economic mission. Specifically, according to the Social Report of the Insurance , during the year 2013 the insurance settled 2,400 mortgages , and that is that many Spaniards hire it to respond to the payment of their mortgage and in this way not to leave to their relatives the weight of a mortgage of them to take charge when they are missing.
Hire a 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 grant you many benefits, especially the assurance that your relatives will be protected in the event that something happens to you.
When you go to hire, take into account all the coverage and exclusions of the policy and be honest in the questionnaire that the insurer will make about your health condition so that it is correct and the insurer will compensate you or your beneficiary in case of loss. If you want to hire the Life insurance that suits your use and you can see at a glance the coverages and the price offered by the main insurers.