Which type of Life Insurance is right for you?
Types of life insurance
Although a life insurance policy will basically deliver an insured sum to your beneficiaries in the event of your death. The insurance industry has several alternatives that can provide you with other benefits when you insure yourself to offer more attractive and complete plans.
Temporary Life Insurance
There are basically two types of term life insurance. The term temporary corresponds to the fact that these plans will provide coverage for a determined period of time. Once this period has expired, the plan will be cancelled. What is relevant is that at the end of the term, the policy will be underwritten again. This means that you must meet the insurability requirements such as age and good health.
+1-year term (Life insurance renewable per year):
This is an insurance policy that is contracted for one year. When it expires you can renew it, but there may be restrictions in this regard. If you are interested in having an economic protection and only for a few years, this is a good option in that case.
The disadvantages of this annually renewable insurance:
Its price, being related to your age, will rise at each annual renewal.
If you should contract a disease, the insurer can deny the automatic renewal if it deems it convenient (or otherwise raise the cost considerably).
+Temporary insurance at a certain age or for a certain period of time.
This insurance is contracted for a predetermined term. Generally it can be from 5, 10, or until you reach a certain age. For example 65 years old.
This insurance is simple. If you die, your beneficiaries will receive the amount you decided to take out, and during the term, a level premium will be charged. In other words, there will be no change in price as your age increases.
Some points against are:
If you do not die within the term of protection there is no recovery of premiums.
If you wish to continue to be protected, even if you fall ill at the end of the contract, it will not be possible due to the fact that it is a fixed term contract.
This insurance is for you if:
You want to pay a fixed and affordable amount for the entire term of the policy.
You want to guarantee coverage for a previously defined term and at an affordable price.
You need to be clear about what you will pay monthly and annually.
If you are looking to cover a possible death without confusing and expensive extra coverage.
Life insurance for life
It will allow you to be insured until you decide so for the insurer it can be a lifetime plan. You will be covered for practically all your life, since the policy usually covers up to 99 years of age.
In addition, this insurance generates a savings fund plus yields, so that in the event of cancellation of the policy, the surrender value plus the yields generated can be withdrawn. The longer you are insured, the higher the surrender value and yields will be. Therefore, in addition to giving you protection, it will allow you to recover part of what you have paid.
Disadvantages of a life insurance:
These are plans in which the Premium (cost of the insurance) will be higher than what you will pay for an equal sum insured in a temporary plan.
If you plan to be insured for a short period of time, the values generated will be very small. They will even start to be generated from the 2nd year of validity and will grow little by little.
A life insurance is a good idea, if:
You want your premiums paid to generate a return over time, thinking about the possibility of recovering them at some point.
You want to be sure that you or your beneficiaries will collect the insurance at some point. Well, you decide how long you want to be insured
You want to be protected for all the years of your life.
Endowment life insurance
This insurance contains a savings element in case of survival. This savings is delivered at the end of the established term. That is to say, in case you do not die, you will receive the corresponding sum stipulated in your policy. The savings will generate yields during the time you have your insurance.
Disadvantages of these types of insurance:
They are expensive compared to other life insurance policies because you have to cover the death protection plus the amount destined to savings.
It is not clear what percentage of the premium goes to death protection and what percentage goes to savings.
The returns on the savings percentage are usually not very profitable. Sometimes; it would be better to make investments on your own with other financial tools. You must remember that the value of an endowment plan is protection and savings is a supplement.
Who is endowment insurance for?
For people who are not in the habit of saving, it is a way to "force" themselves to do so.
People who want to be sure that they will receive an insured amount at the end of the policy term.
For those who wish to have protection for their family and invest money at the same time.
An excellent example of these plans are the educational insurance or "student loans". They are actually endowment insurances oriented to the payment of university education.