Life insurance: knowing the essentials before committing

Life insurance allows you to both build your funds and to insure you in later life.

Life insurance is designed to cover the passing or the survival of the insured. This is to say that, in case of death, the beneficiary will receive a capital as in the case of accidental death insurance and in the case of survival, the insured will receive a pension with which he may retire. Our life expectancy is becoming increasingly higher, therefore, it is highly recommended to take out a life insurance policy to better enjoy retirement.

Moreover, life insurance has many advantages because it is a way to simultaneously save and to secure a return on one’s own money. In fact, life insurance is a kind of investment with a return that varies at an average of approximately 4%. Furthermore, it provides additional tax benefits.

This insurance is available in three primary forms:

We can distinguish life insurance by its aim to guarantee the insured an annuity or a lump sum after the contract if the insured is still alive at the expiration of this contract. However, with this type of insurance, in the event of the death of the insured, the insurance company is cleared of all obligations unless a counter-insurance accompanies the contract.

The second type is death insurance. It aims only to ensure the payment of a capital to the relatives of the policyholder in the case of death. It spares the family of any possible financial burden caused by the death of the policyholder. Finally, the most common type is life and death insurance which combines the two previously mentioned forms of insurance.

Many financial institutions suggest life insurance, apart from insurance companies. This means you may take out a policy with a bank, brokerage firm, and because it is an investment, with a savings banks and even the post.

Life insurance offers two types of investment support. You can opt for a contract in pounds, a contract adjusted for interest on an annual basis or a multi-support contract. This last option is somewhat complicated as it involves a fund in pounds and the account units can be bonds or equities. The insurer does not guarantee accounting units, and therefore they may represent a risk to the policyholder.