Although there is some reluctance towards this type of product, it is highly recommended, especially if the person who hires it has people in charge of it.
After the declaration of the coronavirus outbreak as a pandemic by the World Health Organization (WHO), the doubts and claims of clients in different types of insurance have skyrocketed, according to the report ‘Impact of covid-19 on the insurance sector, by the consultancy Deloitte. However, death from covid-19 should not be a problem when collecting life insurance, since they generally do not include pandemic exclusion clauses.
The Spanish Union of Insurance and Reinsurance Entities (UNEP), the business association that groups the insurance entities of Spain, has reiterated that the insurance companies are covering the different contingencies. And, although life insurance usually covers death from any cause, some companies establish exceptions in case of epidemics and pandemics. However, most insurers that contemplated this exception have decided not to temporarily apply this clause during the coronavirus pandemic.
According to data from the association of Cooperative Research between Insurance Entities and Pension Funds (ICEA), at the end of 2019 in Spain, there were more than 21 million people who had life insurance. Taking into account that every year almost 70,000 people die in Spain, according to UNEP, approximately one in six had a life insurance contract.
Life insurance is a highly recommended option, especially if the person who hires it has children, or dependents or is the only source of income in your household. Although these types of policies are also designed for people who are alone. Life insurance can offer guarantees to cover a situation of disability or dependence as a result of an accident or illness.
Ignorance and prejudices of the sector
However, to this day there is still a reluctance to hire this type of product. Historically, the sector has projected an unattractive image for the population. According to the report ‘Study on the ’employer branding’ of the Insurance sector in Spain’, carried out by Fundación Mapfre, there are several reasons why this negative vision of the sector persists.
The complexity of contracts is one of the factors that feed the belief that policies are drafted in a way to favor the position of the insurer. Although there are companies that have made an effort to simplify the information the customer receives, the stigma of the “fine print” still exists.
Other aspects to take into account and that encourage this negative vision are the association of the insurance activity with that of the commercial that sells door to door; cases in which the contracting of insurance is imposed as a precondition to another contract, as in the contracting of mortgages; and, in general, cases where customers have not received enough information or it was not sufficiently clear.
In addition, according to a study carried out in 2021 by Fundacion MAPFRE and ICEA, the main attributes and qualifiers with which people spontaneously define the insurance sector are: self-interested, opportunistic, deceptive, complicated, ineffective, and slow, among others.
However, this negative perception is the result of great ignorance of the sector. Specifically, the generation of millennials is the population group that does not know this type of insurance. As stated in the report ‘Millennials’ and insurance in Spain’, carried out by Fundación MAPFRE, 46% of this group of citizens has a low level of knowledge about life insurance.
What is life insurance?
Life insurance is a policy that covers the risk of death, survival, or both, to which others such as disability can be added. It can become a guarantee to be able to face the death of a person with greater peace of mind. In addition to providing an economic amount to the beneficiaries in case of death, it also facilitates the resources required at home in case of disability.
There are three types of life insurance: death, survivorship, and mixed. The former is usually the most common and guarantees the payment of capital or an income to the beneficiaries in case the insured dies before the end date of the contract.
Survival insurance is also known as savings insurance, it is usually contracted for a certain period and its price is calculated taking into account the age and the chances of death of the insured person. In this case, the principal or rent is paid to the insured if he survives on the end date of the contract. Finally, mixed life insurance is a combination of the previous two, and guarantees the payment of capital or income whether the insured survives the end date of the contract, or dies earlier.
As explained by UNESPA, the usual thing is that life insurance is contracted from the age of 30, since it is when the person usually has more economic and family burdens”.
Benefits of Life Insurance
- In the first place, it offers peace of mind to those who hire it, since it allows the beneficiary to receive economic compensation from the company after the death of the insured. This capital is free of attachments, that is, even if the debts of the deceased are rejected, the insurance compensation is received in full.
- In addition, although the capital received by the beneficiaries is subject to inheritance and gift tax, in most of the Autonomous Communities reductions are applied that can reach up to 100%.
- On the other hand, self-employed workers can be deducted their income tax return up to 500 euros for the premiums they have paid for their life insurance.
- Life insurance offers the possibility to modify the policy over time, either by changing the coverage or the list of beneficiaries.
- As already mentioned, life insurance not only protects the family nucleus but is also designed to benefit the policyholder to face any circumstance that is contemplated in the policy, whether cases of disability or dependence.
- Some companies offer the insured the possibility of choosing the form of payment they prefer (monthly, quarterly, annual, etc.)
- Life insurance provides peace of mind, especially in cases where the insured has a mortgage, minors at their expense, or a job that entails some danger.