Even if you’re not a stuntman, an extreme sportsman, or a daily risk-taker, look into life insurance policies. With life insurance, you can save for planned expenses like weddings or down payment on a mortgage, or you can provide a raise for your retirement. How many life insurance policies can I have?
What are the benefits of life insurance?
In addition to the basic purpose of providing money for your loved ones in case something should happen to you, life insurance has other benefits:
Save for planned expenses – like your children’s college tuition;
To save for a pension increase.
There are several types of life insurance and you can get each policy.
Risk Insurance
Pure risk-based life insurance involves a single insured event – quitting. In that case, the insured makes a single payment or pays it regularly, depending on the contract. When an insured event occurs, his relatives receive the money. Risk-based life insurance often becomes the basis for so-called mixed insurance, in which you receive payment even if you become ill or injured. No savings are made. The premiums are calculated by the insurance company representative. It depends on the company’s rates and other factors (for example, the amount of benefits).
The cumulative insurance
A combination of insurance and savings. In classic endowment insurance there is a fixed rate of return. True, and the possible return will be lower than with investment insurance. Once you’ve signed a contract, you may have both or one of two options:
- An insured event occurs – your beneficiaries (that is, those you specify in the contract) will receive the payout;
- By the end of the contract, nothing happens to you – you get your savings.
Voluntary pension insurance
The voluntary pension insurance program is similar to savings insurance. The first difference is that the “important event” is reaching retirement age, and the second is that you can choose the period during which you (or someone else you choose) will receive an additional pension. Otherwise, it’s the same: You choose your pension amount and pay regular contributions.
Investment insurance
In this case, you let an insurance company manage your money. The savings are divided into two parts:
- The guarantee part will ensure the return of your money if the situation in the stock market is unfavorable;
- The investment part can provide additional income.
Not all of the capital accumulated with your contributions may be protected from adverse market conditions, so read the terms and conditions of the contract carefully. You can choose one of the investment programs offered to you by the insurer. Each insurance company decides independently what exactly will be included in the investment portfolio, usually creating several offers for different strategies:
- aggressive – with the probability of more income, but also more risks;
- conservative – where the risks of losing money are lower, but the probable profit is less.