The death insurance, popularly known as “insurance for the dead”.”, is widespread in our country. Spain has more than 20 million people insured, The question is what type of premium (or policies) should we take out. The question is what type of premium (or policies) we should take out. Here we explain it to you.
But before determining which is better, let's know the definition of the natural premium and the level premium, the two most common types of insurance when it comes to funeral insurance.
What is the level premium?
The level premium is the type of policy where while you are young you pay more than you would pay in the natural premium, but you are not paying the natural premium. as you get older you pay a lot less than that one.
The reason for this is that the factor by which the premium rises year by year is not the increase in age, but only the possible increase in the value of the service. In other words, the CPI of the cost of the funeral service.
Taking out a funeral insurance policy in this form is particularly interesting from the age of 55-60. Before that, we think it is more advisable to take out what is known as the mixed modality.
What is the natural bonus?
The natural premium rises year on year due to two factors:
- Age: The longer the years, the higher the applicable rate and thus the higher the premium.
- The value of service: The natural premium usually rises every few years, which is another reason for the increase in the natural premium.
As we can see, there are two different options available to us, each with its own advantages and disadvantages:
- In the level premium We will see that when we are young we pay more, but when we are 70 and older we will pay much less than in the natural premium option, as the premium is much more constant.
- In the natural bonus, In contrast, when we are young we pay less, but as we get older we will see that the increase is notable; even more, if we are lucky enough to live to the age of 85-90.
The keys to funeral insurance
The death insurance covers the costs of administrative formalities, transfer of the body, burial costs (also if cremation is desired), etc.
Increasingly, we see a number of additional and complementary guarantees (e.g. dental insurance). In this post from a few months ago, we already explained our opinion on these services, as well as the advantages of funeral insurance for their policyholders. In addition, we looked at the virtues of the insurance policies that are now being marketed compared to others that may have been underwritten for a long time.
We will start by explaining what factors influence the price of a funeral insurance policy:
- The age of recruitment: It is not the same to start insurance at birth, as is typical in many families, as it is to start at 60 years of age. The company values the fact that you have been insured all that time, and the cost changes (technically, you could say that the rate is not the same).
- The value of service: This is the cost to the company of meeting all the expenses associated with a funeral. People are surprised when they see €3,000, instead of €5,000-6,000; but it's that for a company is much cheaper than for a private individual; as it pays for thousands of services per year. This variable changes from province to province, and increases year by year, just as the CPI does.
What about the premium «mixed«?
So far we have focused on natural and level premium. But there are drawbacks to both. In an attempt to alleviate this problem, some companies have come up with the so-called “mixed premium”, which:
- It has the advantages of the natural raw materialWe pay considerably less than the level when we are young.
- When we reach the age of 60-65 years, it becomes level premium to avoid the dreadful situation of not being able to cope with the insurance premium when we reach 75-80 years of age (as has happened in some cases of having the natural bonus).
From PIB Group Iberia we work with the main funeral insurance companies. If you would like us to inform you about which companies offer this type of death insurance policy with mixed premium, or you would simply like to review your current insurance, please contact us.
