When purchasing life insurance, it is important to understand the types of insurance offered. Generally speaking, temporary insurance is the best choice from a financial planning point of view.
If you are looking to protect the plans of those you love and depend on you, you have probably come across numerous types of life insurance and were in doubt: Which is the best option? Let us help you!
When we take out life insurance, it is difficult to understand that the premiums (which are the amounts paid monthly) will not always be converted into a material asset for you to enjoy.
On the other hand, we hope that our beneficiaries do not need it. Nobody wants something bad to happen.
With that in mind, we explain here the two main types of life insurance currently offered on the market. So you can understand them better and make the best choice for your needs.
Temporary Life Insurance
Temporary life insurance doesn’t involve much mystery. Once the insurance is contracted, a policy will be issued that has a defined validity period, which varies between 1 and 30 years. If you die within this period, those you have chosen as your beneficiaries will receive the compensation amount.
If nothing happens during the validity period of the policy, your insurance may expire or be renewed, according to what was signed in the contract.
And how much should you pay to have temporary insurance? The premium (or monthly fee) varies from person to person, and its calculation considers factors such as age, the lifestyle of the insured, amount of indemnity, and validity of the policy.
Overall, the value of this type of insurance is the lowest when compared to redeemable life insurance.
In any case, know that there are important points to consider when purchasing temporary life insurance:
The prize amount will be adjusted annually
As we get older, our risk of death increases and, consequently, the chances of the insurer needing to indemnify its beneficiaries as well.
Therefore, once a year, on the anniversary of the policy, the amount paid monthly changes. It is worth remembering that this adjustment has legal support and is defined by the probability of death of the population, according to sex and age, based on surveys carried out by the IBGE year by year.
Insurance may not be renewed
When the policy expires (or when there is no option to renew), even if you want to take out another insurance, there is a chance that you will not be approved.
This is because it is necessary to re-file the personal health declaration, and depending on your health situation and lifestyle at that time, the insurer may refuse to provide coverage.
Redeemable Life Insurance
Redeemable life insurance involves a number of special rules and conditions. In summary, we can say that the big difference in redeemable life insurance is the possibility for the insured to withdraw a portion of the total amount already paid to the insurer after the grace period determined in the contract. In addition, the premiums of this insurance are leveled, not being readjusted according to the insured’s age.
It is important to note that this type of contract is intended to be for life. If you finish paying the contract time and don’t withdraw any amount, you have the option to keep coverage for when something happens to you.
Also, if you decide to withdraw the entire amount available, your policy is canceled – and so is your insurance. If you only redeem a part, the coverage paid in the event of a claim will be reduced proportionately.
As with temporary insurance, redeemable insurance also has some points of attention:
The value of the prizes is much higher
The fact that the contract covers more than one type of insurance, combined with the fixed value of the premiums, makes the monthly amount 10 to 20 times greater, giving you the right to proportionally lower coverage than you would have in the temporary insurance. .
It is not possible to redeem at any time.
In order for you to be able to withdraw part of the insurance, there is a minimum premium payment period. This period is usually 2 years.
Thinking about it, this type of insurance does not open a gap for crises (such as a pandemic, for example), as you would lose your money if you needed to redeem the amount paid before the deadline.
Redemption is less than the total amount of premiums paid
Even if some products promise up to 3% above inflation, which can seem like a good deal while it’s low, other investments pay more.
However, comparing quotes for redeemable and non-redeemable insurance, those who need to guarantee more significant values realize that non-redeemable insurance has more affordable monthly values, allowing them to make other more profitable investments while maintaining coverage.
We also point out that there are other reasons for reducing the redemption value:
- There is a discount referring to the loading fee (which covers the expenses of the insurance company);
- No interest is levied on the reserve, which means that there is no income based on the amounts paid.
Note that, despite being a way to get back a part of the amounts you paid, redeemable insurance is not a form of investment precisely due to the lack of considerable income from the amount paid.