How to choose life insurance?

Do you want to take out life insurance but don’t know how to choose? You need to consider factors such as lifestyle, desired coverage, and financial planning. Understand how to define the best protection.

Life insurance is essential protection for every family. After all, it allows beneficiaries to go through moments of emotional difficulty with greater financial tranquility. However, for many people, choosing this product can be a difficult task.

This is because it is common for doubts to arise about which is the best option to hire, as there are many details that must be considered at this time. You also don’t know how to choose your life insurance? To continue with us!

In this article, you’ll learn more about life insurance and the factors you should consider when making this choice. 

Do you know how life insurance works?

First, it is important that you understand more about life insurance. This is financial protection contracted with an insurance company, which will pay compensation to its beneficiaries in the event of death. 

Mandatory basic insurance coverage refers to accidental or natural death, but there are other products with more types of coverage, such as:

  • accidental disability;
  • permanent functional disability due to illness;
  • permanent work disability due to illness;
  • daily hospital stay;
  • temporary disability;
  • support for loss of income;
  • serious diseases.

For this, the insured makes the monthly or annual payment (premium) to the insurance company, according to the contract. Thus, the purpose of this product is to guarantee the holder or family members the necessary financial support in the event of a claim provided for in their policy.

How important is life insurance?

Now that you know what life insurance is and how it works, you should know the importance of this protection. As it was possible to perceive, it serves as a guarantee of security and tranquility for the insured’s beneficiaries.

This is even more important when the holder is the main provider of the family. Even if the insured leaves assets, the heirs do not have access to the assets immediately after the entry of the probate.

In practice, the sharing of assets can take years, which can result in financial difficulties in that period. The insurance is paid within 30 days after the claim is reported. Therefore, the family will be financially secure until it recovers.

In relation to other types of personal insurance, the insured can count on financial protection in cases of serious illness or in which he sees himself with the ability to generate reduced income. Also known as life insurance, this situation occurs when the holder is the beneficiary himself. 

In this way, insurance can bring financial tranquility in various situations. 

What are the biggest challenges when taking out insurance?

Although taking out life insurance is simple, there are challenges in choosing this product. After all, there are many options available on the market, often with information that seems complex to those who do not understand much about the subject.

There are still other important issues that need to be carefully analyzed so that the chosen insurance meets the insured and their dependents. Policy value, coverage, and planning are some examples of these factors.

Talking about death is taboo for many people. Therefore, discussing with the family financial needs after the death of a loved one can be very delicate; but it is the best way to ensure that the insurance conditions are suitable for the beneficiaries.

How to choose life insurance? 

After learning about life insurance, its importance, and its challenges, it’s time to learn how to choose the protection that meets your family’s needs. Next, check out what to consider in the decision!

understand the terms

The first step is to understand the terms used when referring to life insurance. Thus, you will have a better understanding when choosing the right product. 

See the main concepts:

  • premium: amount paid to the insurer in return for the responsibility to pay the indemnity to the beneficiaries. The greater the indemnity, the greater the value of the prize;
  • policy: contract in which the insurance conditions are documented;
  • grace period: a period in which the insurer is not yet responsible for paying the indemnity, even if the accident occurs;
  • claim: event provided for in the contract (death, disability, diagnosis of serious illness, etc.);
  • coverage: risks insured by the policy;
  • validity: validity period of the guarantees provided for in the insurance.

Conversation with the family

Talking about death is not usually a pleasant subject, but this conversation is necessary. From there, you will be able to establish with your family the conditions that will make them comfortable in the event of an accident, such as:

  • types of coverage;
  • compensation amount ;
  • prize amount;
  • beneficiaries.

Financial planning

Knowing the requirements that life insurance must have to leave your family members financially calm, it is important that you make financial planning. With your budget in hand, establish the amount that can be disbursed to pay the premium.

This payment should make up the security slice of your financial plan, allocating a monthly amount to cover this expense. To do so, it may be necessary to make budget adjustments to include the premium amount in the obligations.

If there are other priorities and fitting the premium amount means giving up some of them, it may be better to rethink whether this is the best time to take out your life insurance. Financial protection is important, but it cannot be synonymous with suffocation or headache. 

Policy conference

As you have seen, the life insurance policy is the contract that contains all the product information. For this reason, it is essential to read this document carefully and check all the details, such as:

  • personal and dependent data;
  • contracted coverage;
  • indemnities provided for each of the coverages;
  • prize amount;
  • situations that are not covered by the coverage.
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