Life insurance is an insurance product that offers, in exchange for a premium, economic protection in the event of eventualities such as the death or disability of the policyholder. What is a life policy for? Its objective is to grant family and close friends help at the time one of these events occurs. It is very useful when contracted by the person who brings the main income to the household.
To understand the operation of this product, four concepts must be taken into account that refer to the parties involved in the insurance:
- Insurer: This is the entity to which the premium is paid and which, when the time comes, must pay compensation.
- Policyholder: Who contracts the insurance and pays the premium.
- Insured: It is the person on whom the life insurance is contracted. It can coincide with the policyholder.
- Beneficiary: The person who will receive the capital established in the policy when the circumstances contemplated in the contract occur. It is designated by the insured.
Therefore, life insurance is a contract between the insured and the insurer. It consists of the payment of a premium, which is stipulated at the time of contracting, in order to receive economic support that replaces the insured’s income in the event of death or permanent disability.
What is life insurance according to Wikipedia?
According to Wikipedia, it is insurance that covers different risks such as death, disability, and in the case of life savings insurance, survival. These are risks that are closely related to the integrity and existence of people.
In the case of it, so that they are formalize and can protect us, there must always be a its contract sign by the insurer and the policyholder. It is in the contract where all the parties to the contract must be well reflect, both the insured of the policy and the beneficiaries who must receive compensation if any of the established contingencies occurs.
What is a life insurance policy?
One of the concepts that is essential to know when we talk about life insurance is the policy. By policy we refer to the legal document with which the agreement between the insurer and the policyholder is made official and which contains all the agreed details.
This document contains all the conditions of the life insurance contract and indicates the people involved in it (who is the beneficiary, the insurer or the insured). It also reflects the rights and obligations that each of them has. In the case of the insurer, cover the insured person and pay compensation in case the contingency occurs. On the part of the policyholder, who may be the same as the insured, the payment of the agreed premiums?
All the situations cover by the insurance and the exclusions that will not be cover are also written in the life policy. An example of exclusion is suicide in the first year, which according to the Insurance Contract Law, cannot be cover in any case. Measure take to prevent fraud.
What does life insurance cover?
As indicated above, the main risk cover by it is the death of the insure, whether natural or accidental. Keep in mind that there are situations that life insurance does not cover. Those know as life insurance exclusions.
Depending on the needs and preferences of the policyholder, other types of additional coverage may be add that will provide greater protection in different situations.
Additional coverage in life insurance
You can add different guarantees to your life insurance. In this case we are going to point out the 3 most important ones. Although depending on the insurance company you can also contract other additional services such as double or triple capital, repatriation, online will…
- Coverage for permanent or temporary disability: This is an addition that covers the risk that due to illness or accident, whether in the workplace or personal, the insured cannot continue with their work or professional activity.
- Critical illness coverage: This is another risk that can be include in life insurance. The insure is cover in the event of suffering from a serious illness, for example, cancer. . It is a coverage that does not usually appear in the policies of older people. Since they are more likely to suffer from these diseases.
- Coverage for disability or death due to accident: Many life insurance policies offer extra compensation for death or disability due to an accident. It is a special type of coverage, since if certain conditions are meet. It can be double or triple the main guarantee. For example, if the insure dies in a traffic accident. The beneficiary may receive triple compensation.
It is important to think carefully about the type of coverage you prefer for your life insurance. Since the risks can be varied depending on your personal and professional situation.
What does life insurance not cover?
Keep in mind that in some policies, death due to the practice of risk sports is exclude. As well as some professions, such as those related to aviation. Therefore, if you carry out any of these exclude activities (which will always be reflected in the contract) you have to choose an insurance that covers it. Taking into account that its price will be higher.
Life insurance can also include a grace period to limit the coverage of the policy for a set time. Usually in the first few years. During this period, the policy will not cover the death of the insure for a specific reason, such as suicide. This is a measure taken to prevent fraud. For example, if someone is planning to commit suicide. They will be prevent from taking out life insurance just before doing so.