What is life insurance: how it works and when it is worth it

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What is life insurance: how it works and when it is worth it

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You've heard of it, but you really know what is life insurance?

Life insurance is a basic social protection offered by a provider and insured by an insurer, which guarantees financial protection to a dependent, in case of absence.

This type of protection is usually more popular in the family scenario, in which the provider contracts this type of service to guarantee a certain tranquility in the event of his death or other situations provided for in the contract.

To help you better understand how life insurance works and whether or not it is worth hiring, we have prepared this material with detailed explanations. Follow below.

What is life insurance?

During our life trajectory, some risks are experienced voluntarily or not.

It is impossible, even for the most cautious, to control the occurrence of unexpected situations. Unforeseen events happen and, many times, the result is not the most pleasant.

To prevent situations like these from compromising job security and everything you’ve achieved, as well as your family’s well-being, hire life insurance can be an interesting solution.

As we have already said, the concept of what life insurance is is a financial protection service for dependents, in case of lack of the provider.

But it must be made clear that life insurance it is not a type of investment he's just hiring a service financial security.

How does life insurance work?

Protection is offered by a insurance company, which upon payment of a monthly fee, also called a premium, allows a person hire an indemnity service.

The insurance is divided into plans with different coverage, just as with medical insurance.

The greater the degree of risk and the number of dependents, the greater the premium.

The indemnity will depend on the financial plan of the contractor.

When closing a contract, the insurer guarantees that it will protect financially the family or who are their dependents, should something happen that interrupts your income.

Here, it is worth emphasizing the importance of evaluating different insurers and knowing their offers, so the chances of getting more satisfactory coverage increase.

In addition to verifying that the companies are properly regularized and inspected by the National Private Insurance System (CNSeg), to ensure the security of capital.

In what situations can life insurance be used?

The activation of what is life insurance it is guided by the conditions defined in the contract.

The main situations in which the indemnity is released are:

  • natural death;
  • accidental death;
  • accident disability;
  • permanent disability due to illness;
  • serious diseases;
  • daily hospital stay;
  • daily temporary disability;
  • funeral assistance or assistance;
  • loss of income;
  • unemployment.

Life insurance can still be combined with other protection complementary, such as:

  • coverage of educational expenses;
  • debt settlement;
  • Travel insurance;
  • housing insurance, among others.

There are also redeemable life insurance, in which the amount can be withdrawn if necessary, even if the situation does not include such inconveniences.

It is part of financial planning and guarantees redemption, with interest and corrections, after a certain grace period.

The agreement with the insurer will define these conditions.

What are the most common types of life insurance?

Now that you understand what life insurance is, it is important to know the models available.

The most common types on the market are individual and the collective.

In the individual, the insurance covers the risks of a single insured, the direct contractor of the plan, and is tailor-made, according to:

  • age;
  • Lifestyle;
  • profession;
  • interests.

This is a more expensive hiring option.

The collective insurance is done by a company or union, which will be responsible for negotiating:

  • roofing;
  • guarantees;
  • insured capital;
  • product format.

Although it is more economical, as it is a generic insurance, it may not take into account the needs of the insured, as in an individual plan.

Many companies offer life insurance as a corporate benefit.

How to trigger the life insurance indemnity?

To activate the life insurance, just follow the following steps:

Have the policy

The first step in how life insurance works is to have the policy in hand, as the document contains all the information in the contract, such as:

  • insurance coverage;
  • validity;
  • recipient;
  • triggering situation;
  • requirements;
  • general payment terms, among others.

Communicate the trigger

Then it is necessary to inform the insurer about the activation of the life insurance.

Pay attention to the deadline, as the beneficiaries have up to 3 years to request the release of the indemnity.

Counting begins on the date of the claim.

Deliver the documentation

After notification, the insurer must ask for delivery of documentation that prove the occurrence of the claim and verify the identity of the beneficiary.

Receive compensation

According to the Superintendency of Private Insurance (Susep), after the delivery of the documentation, the insurer has a period of 30 days to make the payment of the indemnity to the beneficiary.

For whom is life insurance worth it?

Life insurance is indicated for younger people, with spouses and / or children, who have not yet accumulated enough to leave them in a financially comfortable situation in the event of an unwanted unforeseen event with them.

As the insurer calculates the premium based on the degree of risk, increasing age is a limiting factor.

Therefore, it is ideal to take out life insurance as soon as possible, so the contractor still guarantees a higher insured capital and lower monthly payments.

For whom is life insurance not worth it?

It would not be an interesting hiring for young single people without dependents.

The most suitable in this situation would be save money, that is, investing capital in order to increase its equity.

Financial education specialists can direct this investment to ensure the best returns.

Among the main options are:

What is life insurance would also not be worthwhile for people who have already accumulated enough to leave their beneficiaries in comfort, maintaining the same standard of living.

Whether through the sale of goods or the income from investments, if there is sufficient capital, life insurance would not be a smart contract.

Life insurance is a protection service that can make a difference at decisive moments.

So it is a measure that should be considered carefully, if it is within your financial plans and conditions.

Its validity is in accordance with the coverage of the essential needs of its beneficiaries, so it is an importance that only falls to the contractor.

Life insurance, when done responsibly, can protect your legacy and the well-being of your family.

And in your opinion, is life insurance worth it? Tell us here in the comments!

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