Types of Life Insurance you need to know about

There are several types of life insurance that you can choose, each of them with their specific characteristics. First, let’s make a distinction between whole life insurance, when the insured is covered for life, with no deadline for the insurer to stop providing the service; and term life insurance, in which you take out the policy for a specific period of time, during which you will be covered as the insured.

However, the most common classification is based on the type of chosen coverage, these three types of life insurance: risk life insurance, savings life insurance and mixed life insurance.

How does life insurance work?

Life insurance works in a very simple way. It is based on the fact that the policyholder, who is the person who takes out the policy, pays a certain monthly/yearly premium to the insurance company, which in turn pays a third party, called the beneficiary, a certain amount of money (insured capital) in the event of the insured event occurring, which may be the death (or supervening disability) of the insured or the survival of the insured at the end of the time stipulated in the policy.

The amount of the periodic premium that you will have to pay when taking out this type of life insurance is variable and the way it is calculated depends on three fundamental factors: the age of the insured, the insured’s medical history at the time of taking out the policy and the total amount of capital that you wish to insure. The premium is usually paid annually.

Types of life insurance

There are several types of life insurance policies available to you, depending on whether you want to cover the death of the insured person (risk life insurance), his or her survival during the period of time agreed with the insurer (savings life insurance) or a combination of both (mixed life insurance). Let’s take a closer look at each of them:

Risk life insurance

The so-called risk life insurance is the most common type of life insurance on the market. This type of policy covers the death of the insured person, so that when he or she dies, the designated beneficiary obtains the capital stipulated in the contract. Its purpose is, therefore, to protect the beneficiary in the event of the insured’s absence.

However, you can also take out a life insurance policy covering the disability or incapacity of the insured, which is very useful if you are self-employed or an employee, as it allows you to obtain compensation in the event that you can no longer perform your job due to such causes of disability or incapacity.

Savings life insurance

Savings life insurance, also known as survival life insurance, is the one whose purpose is that the beneficiary obtains a certain capital or certain income in case the insured is still alive at the end of the contract term.

This type of life insurance can be very useful as a complement to retirement. In fact, it is often taken out with the date of the insured’s retirement as the date of survival.

Mixed life insurance

This is a kind of hybrid insurance that combines, within the same contract, a risk life insurance and a savings insurance. In this way, the client is covered in the event of death, but if he/she survives to the age specified in the contract, he/she can also benefit from the contracted benefits. Obviously, in the event of death, it is the beneficiaries designated in the policy who will receive the agreed benefits.