Life insurance guarantees a financial amount in the event of death or, normally, disability. It works as follows: small monthly, quarterly or annual payments are made to the chosen insurance company, which will then pay the amount we are insured for: 50,000, 100,000, 300,000 euros… in case something happens to us. So, what is a life insurance policy for, who is the beneficiary of a life insurance policy?
- If the cause of indemnity is death, the money will go to the heirs or the assigned persons, which we will have decided when taking out the insurance (and which can be changed at any time).
- If the cause is disability, the insurance money will go to ourselves. However, BEWARE when taking out a life insurance policy because usually only absolute disability is insured, when we recommend professional disability as well.
There come times in our lives when people here and there begin to recommend life insurance, especially if we are going to take out a mortgage or have children. So what is life insurance for is a question that we answer very often in our insurance brokerage and we will try to clarify in this post. Let’s start!
The raison d’être of life insurance
The main purpose of life insurance is to ensure that our loved ones have a source of income in the event of our death. Let’s say it is like a way to replace the livelihood that a person provided during his or her lifetime. In this case, life insurance serves to cover the backs of the heirs or the persons designated by the contracting party. And the fact is that, if we suddenly pass away, the family loses some income, as well as generating expenses (for example, if someone has to take care of our children if the spouse continues to work).
However, the definition of life insurance goes beyond death, as the classic is life-risk, which covers the insured against two perils: death and disability. It is even possible to go further and insure against professional incapacity.
That is why, as we always insist from PIB Group Iberia, life insurance serves to safeguard the economic security of several profiles: from families with mortgages to single people who, in case of an accident or a serious health problem, could face serious economic problems.
Before starting with the classification, here you can find the best life insurance policies, organized by companies.
What is life insurance for families with children for?
“Security for you and yours”. This is the message that is always conveyed when we talk about life insurance for families, so important especially when there are dependent children. In the event of death or ancillary benefits such as serious illness, the rest of the family would have a livelihood. Historically, it has served to compensate for pensions such as widows “or orphans” pensions.
Life insurance to maintain the quality of life in the event of disability.
At PIB Group Iberia we always inform our clients of all the possibilities of life insurance and how important it is in certain cases to opt for a policy that goes beyond absolute disability. Here we talk about the coverage of permanent total (or professional) disability, an insurance solution that more and more professionals such as doctors, lawyers, architects and many other workers who prefer to cover this risk are interested in. Likewise, if you depend on your physical body to work, occupational disability will also be important for you.
The reason is that most companies usually only cover absolute permanent disability (with which you can never work again) and not total permanent disability (which disqualifies you from your usual profession, but you can do other things). What happens? If the Social Security recognizes an occupational disability -this second case- you would not have the right to collect the life insurance if, as happens by default in many life insurance policies, what has been contracted is the coverage for absolute permanent disability.
What is life insurance for high net worth individuals?
Again, in the case of disability, taking out a life insurance policy makes it possible to pay the costs of maintaining the estate, especially when it is large. Similarly, in the event of the death of the policyholder, it provides financial relief for the heirs who have to pay inheritance tax. In the event of inheriting an estate, this policy helps to obtain the necessary liquidity to meet the heavy taxes.
What is the purpose of life insurance when taking out a mortgage?
Although the law does not oblige you to have life insurance when signing the mortgage, most banks have it as a requirement at the time of receiving the mortgage loan. Therefore, in practice it becomes mandatory.
A mortgage life insurance guarantees the family financial stability against the mortgage in case of death or, if it has been contracted, when suffering a permanent disability.
However, what is not mandatory is to contract it in the entity with which you sign the mortgage. In fact, the law allows you to compare different mortgage life insurance policies and choose the one that offers you the best conditions. Therefore, we recommend that you seek professional help like ours to subscribe the mortgage life insurance. As we have seen, it goes beyond a mere formality, because when it comes to being well protected, the coverage we have chosen will count a lot: death, absolute and permanent disability, professional and permanent disability, additional capital in case of death or disability due to accident.
What is life insurance for single people without children for?
Just as we are perfectly aware that life insurance is important for a family with children, we do not tend to see it as important for a single person who has no children. However, life insurance is very convenient to protect us against a serious event that could lead to disability (again, it is important to differentiate between total and professional disability). Especially when, in addition to seeing our income reduced, we have to add the cost of care. Here you have all the information on what life insurance is for if you are single.
And so much for our review of the cases in which this policy perfectly fulfills its function of being that “cushion” against the vicissitudes of life.
If you would like us to advise you in choosing the life insurance that best suits your circumstances, we will be happy to help you. After 40 years as an insurance brokerage, we have exclusive agreements with life insurance companies that allow us to provide our clients with beneficial conditions. Get in touch with us.
