Is life insurance worth it? See what to take into account before hiring
Have you ever wondered if taking out life insurance is worth it? This service may raise several questions. For example, how it works, what its rules are, what the price is and whether it is important for your reality.
If you want to know the answer to all these questions, it is essential to know life insurance in more detail . This makes it easier to make a decision based on your own experiences, knowledge and needs.
Interested in knowing how life insurance works and whether it’s worth it? So, continue reading this content!
How does life insurance work?
Before you know if a service is worth it, you need to understand how it works. This understanding is the first step in assessing the need to take out life insurance, which is not a difficult task, considering that they are well-known services.
Anyone who has a car, for example, usually takes out car insurance. They are good examples to understand how this type of contract works, as they are more common.
When taking out vehicle insurance with an insurance company, your car will be the insured asset. The insurance policy will list the risks covered by the contract, such as material damage in a traffic accident, injury to third parties, hospital expenses, etc.
In life insurance, you are the insured person — the insurance contractor. In other words, the risks covered concern your physical integrity. This means that, if you suffer a physical injury with more serious consequences or die, the insurance company must pay compensation to you or your beneficiaries, that is, to those you defined should receive in your absence.
Among the life insurance coverages, you can find:
- death of the insured (by accident or natural);
- permanent disability due to accident or illness;
- hospital expenses due to an accident;
- compensation for diagnosis of serious illnesses;
- funeral assistance.
It is worth mentioning that beneficiaries do not need to be legal heirs. The insured person makes a free choice as to who will receive the amount indicated in the policy. It is even possible to choose the percentage of compensation that will be received by each of them.
What is the value of life insurance compensation?
You have already learned how life insurance works and what the main coverages are. Now, it is necessary to understand more about the value of the indemnity in the policy.
Compensation is a predetermined amount that the insurer will pay to the insured or his beneficiaries if a risk covered by the contract occurs. In this way, it can be considered the objective of insurance.
Each contract determines a different compensation amount, which can be separated according to the coverage offered. Therefore, there is no right amount. You need to know the insurer’s alternatives and their contracts to evaluate this point.
Many people use life insurance as a complement to their inheritance or death pension, for example. Others opt for higher compensation to compensate for the lack of material assets in the assets left to the heirs. Therefore, always consider your situation and your objectives with the contract, in addition to keeping in mind the cost of living of the beneficiaries and their needs.
Don’t forget, also, that the compensation can be paid to the insured person himself. This happens in situations of permanent disability, for example. Here, there may be a monthly income or even a single installment, as agreed in the contract.
How much does life insurance cost?
Another very important piece of information for you to be able to decide whether taking out life insurance is worth it is the cost involved.
As you can imagine, you must pay for the insurance to have access to the insurance company’s guarantees and the contract coverage. The name used for this value is premium. Therefore, whenever you come across this term, you will know that it is what must be paid to the insurance company.
The premium for life insurance is determined according to the conditions of the contract. The most relevant variables to determine the payment amount are:
- coverage offered;
- duration of the contract;
- insured capital (indemnity value);
- other benefits;
- form of payment .
Each insurance company determines the values of its contracts, considering these issues. So, in life insurance with the same coverage and rules, you may find premiums of different amounts between companies in the sector.
Therefore, doing this price research and understanding all the details about the benefits of each contract helps to find the best value for money. With this information, you will be able to determine which life insurance is ideal for your situation.
It is worth noting that you should not take out life insurance just because it is the cheapest. The idea is to find a service that meets your needs and has a fair premium to compensate the insurance company, observing cost-benefit.
Additionally, you can check the payment conditions of each contract, whether there are discounts for advance payments and other advantages. This way, it will be easier to make an adjustment between your needs and financial possibilities.
Is it worth taking out life insurance?
You have already seen the main information about life insurance and the terms of the contract that deserve attention. Based on this knowledge, it is possible to decide whether hiring is worth it.
First of all, it is necessary to emphasize that insurance — of any type — are services that you do not want to use. This happens because they will only be activated if an accident occurs, such as accidents, theft, death, disability and other coverage.
Therefore, it is quite common for interested parties to see insurance as just an unnecessary cost. After all, if the covered risks do not materialize, you will incur expenses and will not receive compensation.
However, this idea is wrong. You should think of insurance as a form of asset protection. For example, if you have already invested thinking about setting up an emergency fund, you know that the money will only be used in situations of unexpected expenses or lack of income.
Just like insurance, ideally you should never use your emergency fund, but it may be necessary. Therefore, see insurance as prevention. If the risks actually occur, you or your beneficiaries will have significant financial security.
Given this, it is possible to say that taking out life insurance is worth it. Remember that you cannot know what problems may happen in life. Furthermore, the contractual conditions are negotiable and you can customize the contract according to your possibilities.
Therefore, it is worth considering taking out life insurance to ensure more financial security for you and your family.
What are the main benefits offered to the insured?
Before taking out life insurance, you need to know the main benefits it provides. This will make your decision easier and you will be able to check what coverage is necessary for your case.
As we have seen, the basic coverages in life insurance are the death of the insured person — due to accident or illness — and permanent disability. These risks must be covered by all contracts and are fundamental to your financial security and that of your family.
This is because permanent disability is a situation that leads many people to lose income. In this scenario, it is not possible to work, which significantly affects the monthly salary. Therefore, ensuring compensation at this time helps cover medical expenses and lack of salary.
In the event of death, your family may be affected by the loss of a loved one and a provider. After all, if they depend on you to maintain their livelihood and make payments, their monthly earnings will be affected.
Furthermore, death brings several unexpected expenses. It is necessary to organize the funeral and burial or other ceremony, and file an inventory process, which involves costs for a lawyer, payment of taxes and transfers of estate assets.
During the entire procedure, your heirs may be unable to use the amounts you left in your account or sell the estate’s assets. Therefore, costs are high and income is reduced during this period.
Therefore, the main benefit offered by insurance is the protection of the family’s assets and income. This is a way of ensuring your own support in the event of disability or the income of your family members in the event of death.
What to consider before taking out life insurance?
If you are interested in life insurance, you need to know what to consider before purchasing. Like any service, it is essential to consider all the particularities of the contract and the insurer to ensure good value for money.
Here, the first point to consider is your financial planning. In other words, how much you can spend on the insurance premium and what your financial needs are with compensation for this service.
Keeping these two variables in mind allows you to make a good hire. If the insurance has a very high premium, you may have financial difficulties making payments and go into debt, which is not the ideal scenario.
On the other hand, a very cheap premium means that the terms of the contract may not be as favorable. Therefore, it is essential to seek a balance, according to your planning and financial situation.
This happens due to the relationship between the premium and the compensation. As you have seen, a very high compensation increases the value of the premium. A very low compensation will not be enough to provide relevant financial security in times of need.
Therefore, consider what compensation is necessary for you and your chosen beneficiaries to have financial security with life insurance. Therefore, a recommended attitude is to research the subject and look for different insurance companies to compare contract conditions.