We are facing a concept that a priori is easy to understand. Life insurance is a financial asset through which, thanks to the payment of a fee (annual, semi-annual, monthly or quarterly), it guarantees the payment of a certain amount to the beneficiary of the policy if the insured dies or suffers a permanent disability.
The monetary amount received depends on what the policyholder has paid throughout his life. This must be agreed between the bank or insurance entity and the insured and may vary depending on their age, employment status or health history.
What is the lack of insurance?
When taking out insurance, it is common for the concept of “lack” to appear. This is the period that must pass until the insured can enjoy the coverage that he has contracted. In the case-of life insurance, there is usually a common concern: what happens if a person dies as soon as they have contracted it?
The most common thing is that life insurance does not have a grace period, so if death occurs at any time, the beneficiary will collect the agreed amount. However, there may be some exceptions, such as a death in the event of suicide or the event that the insured already suffers from a serious illness.
What happens if the policyholder dies?
To answer-this question, it is important to be clear about the role of each party involved. The policyholder is the person who hires and periodically pays the insurance fee. The insured is the person that said insurance covers, which usually coincides with the policyholder.
Finally, the beneficiary is the person who would receive the monetary amount defined in the event of the policyholder’s death and is designated by the policyholder. Therefore, if the policyholder dies, the designated beneficiary will receive financial compensation from the insurer.
What are the coverages of life insurance?
Another of the big questions that arise when taking out life insurance is what its coverage is. Here we summarize some of the most common:
Death coverage
It is the main one and the one that gives the most sense to the concept of life insurance. The services that most life insurance policies usually cover include funeral expenses and the monetary amount that the beneficiary will receive, which increases in value as time goes by. However, this coverage will occur as long as the causes of death are among those contemplated in the agreement signed by the policyholder and the insurer.
Disability coverage
Permanent absolute disability coverage is another type of life insurance in which the insured and the beneficiary are the same people, unlike death coverage. In this case, if the beneficiary has the certificate of permanent disability for causes contemplated in the policy, he will receive the monetary amount stipulated by the insurer.
Disability coverage
Another type of life insurance you can take out offers coverage for disability, and it is more common among freelancers and professionals. If the policyholder suffers total permanent disability, temporary permanent disability or medical leave, the insurer will give the corresponding payment. However, this would depend both on the conditions of the policy and the reason for the disability, which must be correctly justified.
What does life insurance not cover?
Although the exclusions depend on each insurer, some are usually quite common in any life insurance:
- Suicide
- Criminal acts
- extraordinary weather phenomena
- Excessive alcohol and drug use
- reckless recklessness
- Wars
- Death caused by an illness already existing at the time of hiring
- Intentional death by beneficiary
Risks and guarantees of contracting life insurance
One of the questions we often ask ourselves is whether or not it is worth taking out life insurance. In general, many people decide when they become parents to guarantee financial stability for their children if they die. However, like everything, taking out life insurance has many guarantees but also some risks.
Main guarantees
The most important advantage of taking out life insurance is ensuring that the beneficiary person or persons will have a good financial cushion in the event of the policyholder’s death. In other words, it guarantees that they can face situations of greater vulnerability, especially if the policyholder contributes the greatest amount of income to the family nucleus.
Potential risks
It is essential to have good advice when taking out life insurance, to make sure that it does not contain any clause that could be leonine and that it is not part of the usual exclusions.
Another fairly common risk comes when people diagnosed with a serious illness decide to take out life insurance. As you have seen, the exclusion due to illness before hiring is usually frequent, which would prevent the beneficiary from collecting the benefit.