Life Insurance: Why You Need It And How To Choose

Life Insurance: Why You Need It And How To Choose

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Even if you are not a specialist, do not play extreme sports and do not risk your head on a daily basis, take a closer look at life insurance programs. With life insurance, you can save for planned expenses like a wedding or a down payment on a mortgage, or you can secure an increase in your pension.

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, to teach children in a university;
  • save for a pension increase.

How to choose an insurance program?

Insurance programs are different, 4 types can be distinguished (the specific conditions for each type can be consulted with the insurer):

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 of so-called mixed insurance, in which you receive a payment even if you get sick or injured. In this case, no savings are made.

In such a mixed insurance, you can choose independently:
  • payment amount;
  • 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 amount of payments).
Example: Oleg works as a driver and pays a mortgage. Last weekend, "he slipped, fell, closed the fracture, lost consciousness, woke up - cast!" Now you won't be able to work for a while. But Oleg has an insurance policy. The insurance company will pay him an amount that will support Oleg's family while he recovers from his injury.

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

A combination of insurance and savings. There is a fixed income in classic property insurance. It is true that the possible income will also be less than with investment insurance. Once you have signed a contract, you can have both options or one of these two:
  • an insured event has occurred - your beneficiaries (that is, those whom you indicate 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").
Example: Nikolai and Anna had a son. Parents are sure that they will give him an apartment when he comes of age. Nikolai pays contributions to the insurance company annually, and on his son's 18th birthday, his parents will present him with a certificate. At the same time, Nikolai's life has been insured for the 18 years: if an accident occurs, the insurance company will pay the accumulated amount on the date specified in the contract.

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 amount 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 less 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.
Example: Anatoly Efremovich decided that his pension would not be enough. For the past 20 years, you have paid contributions to the pension insurance program. After retirement, Anatoly Efremovich will receive additional payments for life. Pension insurance options:
  • Life penssion
  • 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 relative.
  • Pension of
  • fixed term Specifies a certain period in which you want to receive an additional pension (for example, 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).
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