Life insurance: how it works, types and when to purchase it

You would certainly give your whole life for your family, so why not insure it for them? When it comes to wealth management, the main tool you have to cover the potential collapse of a family’s human capital is life insurance.

Functioning

A life insurance policy allows you to cover your family in the event of death for a predetermined amount of money. To do this, the insured makes periodic payments called “premiums,” which cover the cost of insurance over time. The life insurance policy will remain in effect as long as you have a sufficient balance to cover the cost of the policy. To know more, this blog post on wealth management gives you all the details.

Types of life insurance

Universal insurance: combines the basic protection of insurance with the possibility of saving. The advantage is that it does not have a defined duration, that it allows certain flexibility in the payments and the possibility that after a certain time, the insurance is self-financing. The premium paid is therefore high. This allows you to quickly capitalize your balance. From a certain point, the insured can make withdrawals from his fund. It should be taken into account that this possibility of making withdrawals decreases the life of the insurance because it decreases the balance of your fund.

Term insurance: this type of insurance provides basic protection for your human capital in a given period. It is subscribed for a fixed period. If you stop paying your premiums, the insurance becomes null and void. As a result, it has a low cost (low premiums).

What type of life insurance to choose?

If you already have an investment plan, or if you want high protection of your assets for a specific period, it will be more advantageous to take out term insurance, which will only cover the eventuality of a loss. death. If you are not able to have an investment plan, or if you want to pay for the insurance as soon as possible, it will be better to take out universal insurance.

Another important factor is not to narrow your search to the local market. There are some very good international insurance options with very competitive premiums and varying levels of sophistication. That is why you should always get the right advice in order to make the right decision at all times.

When to take out life insurance

Some people think that life insurance should be purchased when they are older, or that they must have dependents before purchasing it. The truth is, life insurance is designed to cover your human capital during your working life. In other words, at the retirement stage, there is no need to maintain life insurance. Indeed, from that moment, it is your financial capital that will be responsible for generating the necessary income.

You have to take into account that the older you get, the higher the probability of death will be, so the cost of insurance will also be higher. To give you an idea, for every five-year period you miss out on, the cost of insurance increases by an average of 50%. Therefore, the best time to purchase insurance is now!