How Much Life Insurance Do I Need?
Life insurance is one of the essential products we must acquire in our lives because it is the way to protect the family in our death. This article will address all the issues surrounding life insurance and give tips on choosing the best one.
What is life insurance?
Life insurance will pay a certain amount of money to the beneficiary if the insured (the person who bought the insurance) dies. To purchase insurance, you need to pay a premium that will be a small fraction of the total amount covered by the insurance.
In other words, if your insurance policy is one million dollars, you will pay a premium of five thousand dollars, ten thousand dollars, one hundred thousand dollars, etc. (depending on the applicant’s health and age).
Why do I need life insurance?
Life insurance is a way to give your family a living in case you die.
Without it, your loved ones will face your loss and a difficult financial situation, especially if you are the only person who contributes income to the household. They are also important because it sometimes covers the risk of disability.
In other words, if you can’t keep doing your daily work, life insurance will either pension you for the rest of your days (depending on the policy) or pay you the amount. For these reasons, they are significant and should be taken out from an early age to avoid leaving the family unprotected.
How to choose life insurance?
There are many different options in the market with different prices that vary according to the degree of coverage they offer. When choosing insurance, you should pay attention to the following:
It’s important to know when they will work. But, then, you have to choose one that fits your lifestyle. That is to say, if we smoke, the insurance policy must stipulate that the information is already known and that any illness derived from this habit is covered.
It is essential to choose life insurance at the lowest cost. However, it should cover those risks to which we are exposed daily. At this point, it is vital to contrast the coverage with the price and make a comparison.
In addition to the previous point, the term is fundamental to determining buying one. Generally, terms have an annual renewal, although you should always check them.
Knowing which cases our insurance will not cover us is crucial in determining which package is best. At this point, choosing insurance with minor restrictions is advisable. As you can see, the above data must be analyzed together to determine which one is best suited to our needs.
It is also important to emphasize that choosing the cheapest insurance is not always the best option in these cases. It is necessary to decide to take into account all that it offers us and its conditions. Otherwise, we might run out of coverage at a difficult time, as the cheapest is usually the insurance that provides the least coverage.
What parts make up a life insurance contract?
Life insurance is made up of the insured, the insurer, the coverage, the beneficiary, the amount of money, and the premium:
- Insured: It is the person who acquires the life insurance and, therefore, the one who is certified.
- Insurer: The financial or banking entity that will be in charge of covering all the contract conditions.
- Coverage: It stipulates the cases in which the insurance will be applied and the exceptions and responsibilities of the insured.
- Beneficiary: The person who will receive the amount of money agreed in the insurance if the insured dies.
- Amount of money: This is the amount for which the beneficiary is insured in the event of the insured’s death.
- Premium: The amount of money that must be paid monthly, bimonthly, quarterly, semi-annually, or annually to the insurer to continue to receive life insurance benefits.
These 6 points are the most critical points of a life insurance contract. Therefore, you should read and analyze the coverage section and the premium in-depth whenever you contract an instrument of this type.
This way, you will know under which conditions your life insurance is adequate and under which it is not.
Types of life insurance
In the case of life insurance, we can find two types:
- This life insurance covers the insured’s death if it occurs prematurely before the contract expires.
- Generally, this type of insurance gives a higher value to the risk than to other aspects.
- Although there are different durations, and you can even negotiate personal life insurance, in most cases, its duration is annual and has a renewal limit.
- The advantage of this type of insurance is that it allows you to contract a very high coverage with the payment of the premium too low.
Whole life insurance
- Unlike the previous one, this type of insurance stands out because it ensures people are permanent without a specific term.
- In other words, you will be insured for the rest of your life.
- The cover payment is made to the beneficiary after the insured’s death.
- In some cases, we can find this instrument with the option of capital restitution. This means that the insured will receive all the premium payments he has made if he reaches a very high age.
As you can see, life insurance can cover you temporarily and permanently under different conditions. So choose the one that suits you best!
Life insurance and mortgage
Life insurance is also widely related to the mortgage system, as it is the backing and one of the fundamental instruments that prevent debts from being inherited.
Surely if you have applied for a mortgage, quoted, or made a credit simulation, you have already noticed a life insurance section in the amortization, which you have not even chosen.
This section is obligatory (required for credit) and necessary since mortgage life insurance will cover the amount remaining from your mortgage in the event of your death. The insurance will be responsible for the debt, leaving your family free. For this reason, acquiring insurance is very important, especially if your mortgage is standard.
However, it would be best if you did not legally take out the insurance that the bank or financial institution where you apply for the mortgage is selling you. Then, you can look for other life insurance options on the market.
So, before acquiring the obligation and signing the contract, it’s best to consult with a professional and choose a low-cost mortgage life insurance with broad coverage. In these cases, we also recommend that you take out a life insurance policy that includes situations of illness or disability.
This way, your debt will be settled if you fall ill or suffer an accident preventing you from working.
Advantages of having life insurance
Life insurance is not a luxury. On the contrary, your loved ones must be covered for any eventuality. Among its main advantages we can find:
Protect your family:
Insurance will leave enough money to your loved ones so they can get ahead and have no financial problems in the future.
Thanks to this, if you are absent when your children are small, they will be able to have that money to continue their studies, feed themselves, dress themselves, etc. You will cover them for a long time, and they will be able to succeed.
Pay outstanding debts:
The insurance covers debts in some cases, such as mortgage payments. Thanks to this, it leaves your family without the obligation to continue with monthly payments that can represent a weighty burden. Also, in the case of the mortgage, the insurance guarantees that your family will have a home and a roof over their heads.
Some insurance covers you in case of accidents or illness (check the policy). In this way, even if the insured does not die, they will receive a pension or a payment for the total amount of the insurance.
Adaptive premium payments:
Insurance has evolved a lot in recent years, which is why it has developed financing plans that allow you to stay insured by making periodic and small premium payments.
In the End
Without a doubt, the advantages of insurance are many. It gives us peace of mind knowing that someone will support our family in case we miss out, and it also has small monthly payment plans. Now that you have a better idea of choosing life insurance review all details and plan to get the one that best fits your needs.