TYPES OF LIFE INSURANCE
Life insurance is divided into two major groups, one is risk life insurance and savings life insurance. According to the general theory, in life insurance, the occurrence or non-occurrence of death during the insurance period is the basis of the insurance. However, most of these schemes include not only life insurance but also accident and sickness insurance elements Life insurance is broadly related to events that occur in the life of the insured. Such an event e.g. reaching a certain age, childbirth, retirement, etc. The insurer is obliged to pay the sum insured when the insured event occurs. When concluding a contract, the insurer is free to agree with the contracting party on the amount of the insurance amount.
Risk life insurance
The feature of risk life insurance is that it only pays in the event of a loss (death, accident, etc.). Risk life insurance is when the insurer undertakes to pay a premium to the policyholder that if the insured dies within the term of the insurance, the insurer pays a pre-determined amount to a pre-selected beneficiary. In the event that the contracting party is alive at the end of the term, the insurance will be terminated without payment, ie if no damage occurs. This form of insurance should ensure that the beneficiary survivors, e.g. any debt of the insured should not put the heirs in a difficult position.
Risk life insurance can also be used as credit life insurance. Paying for risk insurance can be helpful e.g. funeral and inheritance costs. A special type of risk insurance is life insurance, which covers the remaining life of the insure and is thus terminate by payment. Risk life insurance is taken out for health and life protection purposes.
One form of risk life insurance is access insurance, where the insurer undertakes to pay the sum insured to the policyholder or a designated person if he is alive at the end of the insurance period. They are usually tie to their employees by businesses. Risk life insurance is recommend if you want to insure yourself against unexpected events, e.g. we maintain a family, we have a business, we have a high amount of credit.
Mixed insurance is one of the most common forms of insurance that combines risk and access insurance. The insured event is the survival of the insured person at the end of the insurance or death during the insurance period. If the insured person is alive at the end of the insured period, the insurer will pay the sum insured together with the profit. If the insured dies during the insurance period, the insurer pays the sum insured together with the profit.
In long-term insurance, the investment result plays an important role. Profitability cannot be calculate in advance, we do not receive a guarantee from the insurer.
The insurer deducts a portion of the premium, a portion of which is generally unknown to customers. A smaller part of the remaining premium is use to pay for deaths in the entire danger community, the larger portion is pay to insure persons who are alive at the end of the insurance period. These premiums are invest by the insurer from the premium reserve.
The insurer assumes a return when calculating the premium that you will surely achieve and thus calculates the rate of service. The rate of return is usually known from the insurance terms, which is call the technical interest rate. The service provides must be pay for by the insurers even if if the investment result falls short of the guaranty level. The insurer returns most of the investment result to the risk community, retaining the smaller part at its own expense and profit.
Terms of insurance
The client must be familiar with the policy containing the terms of the insurance. You need to pay attention to what loss event is cover by risk life insurance and when you will be reimburse. What kind of care do they undertake to provide in case of illness. You need to be very careful and consult an expert before signing a contract. Risk life insurance is not suitable for saving, its purpose is to provide insurance in case of trouble. If we want to lay the foundations for our future, create a pre-retirement savings, a free-use fund, then choose life-saving life insurance instead of risk life insurance.
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Savings life insurance
The feature of savings life insurance is that the payment can be make monthly or annually. This is savings insurance. before modern insurance, mixed life insurance was not very popular. The disadvantage of these insurances was that the insurer undertook a fixed amount for the highest benefit, which it fulfilled at the end of the term.
We distinguish two main forms of savings, one is short-term savings and the other is long-term savings.
Short-term savings are a security in case something unforeseen bad happens. This safety margin helps in the event of a job loss, unfavorable situation after illness or accident. Short-term savings should be available at all times, they should be equal to a family’s 8-12 months’ income.
For unit-linked life insurance
In unit-linked life insurance for parents, the policyholder has the option of choosing the type of investment in which the insurer will invest part of the premium paid by him. Insurers create a variety of asset funds with expected returns and risks from which the counterparty can choose as they please. With unit-linked, the insurer does not guarantee a return on the investment, it is also possible that the value of our investments will decrease. in the terms of the contract, the insurer determines the cost of the construction.
Supplementary insurance provides protection against additional risks. This may be the provision of an additional service in the event of accidental death in addition to the death service, post-accident service in the case of hospital care, surgery, disability. Whether it is surgery for illness, disability, hospitalization, services for critical illness, such as heart attack, cancer.
Both product families have a market place and purpose. We have to decide personally which one is right for our goals and preferences, so we need to clarify why, we take out insurance, we want to insure ourselves and our relatives, or we want to invest or save. We assess our insurance needs for the service and what burden we are able to bear.
After clarifying the following aspects, select the appropriate shape from the many product designs.
Is it possible to become incapable of work in the family, possibly the death of a family member, the probability of the occurrence of these events, the degree of risk, e.g. what is the degree of hazardous work perform by the insure?
- Can a significant expenditure in the family be predict, e.g. childbirth, marriage?
- Can a change in the family’s financial situation, such as retirement, be expect to cause a lasting event?
- What amount can we spend per month for insurance purposes?
We always study the terms and conditions of the insurance contract and ask for professional help. If we do not understand something. We get to know the insurance concepts that are not clear to us.