To achieve financial balance, it is important to protect yourself against certain risks that can happen on a daily basis. This is why many peoples have, for example, health plans or insurance for their car or home.
What about protections against fatalities in your life? Have you ever found yourself wondering if life insurance is worth it?
Of course, no one likes to reflect on cases as serious as illness or death. However, this is often necessary.
So, how about knowing more about it? Check out the information about how this type of insurance works and find out if it’s worth it!
What is life insurance?
First, you need to know what life insurance means. It is a service similar to the insurance you can take out to protect an asset, such as your vehicle.
When taking out car insurance, monthly fees are paid to transfer the risk of it to the insurance company. Thus, in the event of an accident — such as a theft or accident — she is responsible for the costs.
In the case of life insurance, the objective is to protect you and your family in the face of health-related unforeseen events. In this way, it is a way to maintain financial balance in situations of unemployment, disability for work or death.
There are several plans for taking out life insurance. They vary depending on who the beneficiaries will be, what the coverage will be and, of course, the amount of monthly payments and compensation to be received in the event of a claim.
How does it work?
Knowing what it is is not enough to assess whether life insurance is worth it. It is necessary to understand how it works before deciding. So, let’s explain the main details about it.
Who hires life insurance must pay a monthly installment, which is also called a premium. The amount of this monthly fee depends on the plan you choose — the higher the insurance coverage, the higher the installments.
That is, the price of the service rises according to the quantity and complexity of the risks that will be covered. It is the insured’s obligation to keep the premium payment up to date. Otherwise, you may have problems using the insurance.
Coverage is another key detail in life insurance. It defines which are the claims that generate the insured’s right to receive compensation from the insurance company.
When it comes to life insurance, the most popular coverage is, without a doubt, death. However, this service can go much further than that, as the objective is to maintain financial balance in the face of unforeseen circumstances with your monthly income.
Here are some examples of what can be included in life insurance policies:
- Natural or accidental death;
- Partial or total permanent disability;
- Temporary incapacity for work;
- Serious diseases;
Indemnity is the money paid by the insurer when one of the claims listed in the contract occurs. This amount is also defined in the contract, according to the plan and coverage you request.
In addition to providing a cash value, it is also possible to hire specific indemnification services. An example is education, in which the insurance company pays for college tuition if the provider has problems with its income.
The same can happen with the installments of a real estate financing. It guarantees the payment of the monthly installments of the financing after the occurrence of a claim covered by the insurance company.
In addition to the insured person, the life insurance contract defines who will be the other beneficiaries of the service. After all, one of the great goals of hiring this service is to keep other people protected in difficult situations for the income provider.
In general, the most common beneficiaries are the spouse and children. In this sense, the insured feels more relaxed when thinking about the support given to them in cases that may take away their ability to generate income for their family members.
Is insurance a type of investment?
This is a very common question when thinking about life insurance. Does it configure itself as an investment? If we consider the concept of investing, we soon see that the answer is: no.
The characteristic of an investment is the financial return obtained from it. That is, when someone invests in their own business or buys financial products, they are looking for passive income.
In the case of insurance, the objective is different: the protection of the patrimony. However, saying that insurance is not an investment does not mean that it is not worth it. In fact, the two concepts can be complementary.
Those who invest money can see insurance as a way to protect their investments. After all, it is likely that assets will suffer a large decrease in the face of a serious unforeseen event with their health.
Is life insurance worth it?
Now that you know what life insurance is and how it works, you are able to think about its advantages and disadvantages for your case. It is important to consider the information we have provided before making a decision.
In reality, there is no right answer to the question of whether insurance is worth it or not. This depends on the analysis made by each one. After all, decisions about your money are up to you, right?
Life insurance can be very advantageous from the point of view of protecting your assets and guaranteeing better financial conditions for your family in difficult times.
On the other hand, those who take care of their own finances and make investments may not see so many benefits in insurance. This is because the investor may have other ways to ensure this balance for the family.
Before definitively saying whether life insurance is worth it for you, do some research. Discover the proposals of different companies and analyze the coverage and price of monthly fees. Then you will be able to decide more consciously.