As a general rule, people compare this investment instrument with a bank deposit in terms of profitability, but they forget the main thing for what they buy a life insurance policy: to take care of the future of their relatives.
What are the benefits of life insurance?
In addition to the original goal of providing an airbag for your loved ones in case something happens to you, life insurance has other options:
- Save for planned expenses, for example, for the children’s college.
- Save for a pension increase.
How to choose an insurance program?
Insurance programs are different, 4 types can be distinguished:
1. Risk insurance
In its pure form, risk life insurance involves a single insured event: death. In this case, the insured makes a fee or pays it regularly; here everything depends on the contract. When an insured event occurs, your family members receive the money.
Risk life insurance often becomes the basis for so-called mixed insurance, in which you get paid even if you get sick or injured. In this case, no savings are made.
In mixed insurance of this type, you can independently choose the amount of payment; a list of possible adverse events (disability, injury, fatal illness); term: from one year to 20 years or more.
The amount of the premiums is calculated by the representative of the insurance company. It depends on the company’s fees and other factors (for example, the number of payments).
Another particular case of risk insurance is credit insurance. In this case, if the bank is indicated as the beneficiary, the payment will not be received by you, but by the bank from which you took the loan. If something happens to you, your family will not have to pay for you.
2. Endowment insurance
It is a combination of insurance and savings. There is a fixed income in classic property insurance. It is true that the possible income will be less than with investment insurance.
Once you have signed a contract, you can have both or one of two options: an insured event has occurred, your beneficiaries (that is, those you name in the contract) will receive a payment (at risk of “death”); Until the end of the contract, nothing happened to you, you get your savings (at the risk of “surviving” or “surviving until a certain event”).
That is, you can save money for something important for 10 years, and during all this time your life will be insured. You can choose the number of contributions and payments yourself.
The term is 5 to 20 years or more. It is possible to enter into a contract for a period of fewer than 5 years, but in this case, the profitability will be low and the rates, on the contrary, will be high.
3. Voluntary pension insurance
A voluntary pension insurance program is similar to donation insurance. The first difference is that reaching retirement age is an “important fact” and the second is that you can choose the period during which you (or someone you have chosen) will receive an additional pension. Otherwise, everything is the same: you choose the size of your pension and pay regular contributions.
Pension insurance options:
- Choose the period from which you will begin to receive your supplementary pension. If something happens to you, then the accumulated balance of the pension will not be “used up”, but will be paid to the “beneficiary”, the one you designate: your husband, wife, or other close relatives.
- Fixed-term pension You indicate a certain period in which you want to receive an additional pension (for example, from 65 to 70 years).
What additional pension insurance conditions may exist?
- They can be exempted from paying contributions in the event of disability of the 1st and 2nd group. In this case, additional monthly payments can be assigned.
- Accident insurance (one-time insurance payments for injury, death, and disability only as a result of an accident).
4. Investment insurance
In this case, you allow the insurance company to manage your money. Savings are divided into two parts:
• The guarantee part will ensure the return of your money if the situation in the stock market is unfavorable.
• The investment part can provide additional income.
You can choose one of the investment programs that the insurer will offer you. Each insurance company chooses on its own what exactly will be included in the investment portfolio, usually creating several proposals for different strategies:
• Aggressive: with the probability of more income, but also with greater risks.
• Conservative: in which the risks of losing money are lower, but the probable gain is lower.