Why life insurance is necessary

This article has been updated 04 2020,
Table of contents
  1. Why life insurance is necessary
  2. Risk-Based Life Insurance and its Features
  3. Endowment insurance
  4. Investment insurance

Why life insurance is necessary

Why We Need Life Insurance
We are often offered life insurance. At every bank, at every opportunity. Only for what purpose? We insure our lives in extreme cases where it is impossible to refuse,

like taking out a mortgage. And most often we do it with annoyance:
firstly, because we don't want to think about the very suddenly,
Second - if nothing happens, why pay and lose money.

The word insurance has acquired a negative character in our country, and we have forgotten or do not know why we need life insurance. We have forgotten that it's not just a way to protect yourself and your family from financial losses in unforeseen situations, but also an opportunity to provide for your old age and even earn money. And the choice of insurance should be approached as carefully as the choice of an apartment, a job or a place of education for children. Why? And how do you determine whether you really need it and what you can gain from it?

In order to understand the question, let's start with the basics and consider what types of life insurance programs are divided into.

Risk-Based Life Insurance and its Features

In risk insurance, the payout is made when an insured event occurs.

An insured event can be many things: disability, injury, illness. And here it is very important to have support. This support is the insurance payout. With this money, you can take time out, get cured, and provide your family with a decent standard of living while you're unable to work. Sounds good, right?

Of course, the worst can happen. It's scary to think about, the only thing worse is leaving your children and loved ones without a livelihood. In this case, you, as a responsible person with an insurance policy, will provide your family with a stable future. Money will not replace you, but it is another way of saying you love and care.

That's why risk insurance is suitable not only for those whose lives are connected with dangerous occupations or extreme hobbies, but also for ordinary people who take a responsible approach to their family's future.

Words are good, but you want to hear the numbers. How much to pay?
The size of the payout is the amount by which you value your life. A million? Two? Five? The higher the amount, the higher the premiums, but the more you or your family will get in the end. It's up to you to decide.

But if your goal is not just to protect your health, but to save money for a specific purpose, like your child's future or big purchases, then another type of insurance is appropriate.

Endowment insurance

Accumulation programs combine the processes of creating savings and insurance protection.

We can say it's an upgrade of risk insurance. A cocktail of two in one. It combines the payment when an insured event occurs and the accumulation of funds. Like a piggy bank or a bank deposit, only cooler. Why? Let's see.

Here's how it works: After the first installment, you are entitled to coverage for both the end-of-life and the end-of-life risks. We already know all about the end of life, let's not talk about it too much. Man is so built that he always believes the best.

Imagine if you never needed insurance, what would you end up with? Paying money all your life to an uncle you don't know why?

No, you haven't. There is such a thing as survivorship in life insurance. This is when you've lived to a certain age and nothing has happened to you. It's insurance for the best possible outcome. And even though the word "survivorship" doesn't sound good, it has a very nice meaning. It's cool to get money just for having good health and ensuring a stable future.

So the best way to get insurance is found? What could be better?
There are downsides, like insurance premiums and income are not insurable. But if your insurance company goes bankrupt, you'll still get your money, because any insurance company has a reinsurance company. But you should choose the insurance company responsibly and study the contract carefully.

The life insurance contract is concluded from 5 to 40 years and more. And the earlier you sign it, the more favorable it is.

What to do if in the process you realize that the conditions do not suit you and you can find a better one? There is a cooling-off period during which a person can change his or her mind and take the money back without loss. As a rule, it is 14 days from the date of the contract. Another attractive feature of contributory insurance is that the money cannot be withdrawn even by court order and is not divided in a divorce.

Also, if you sign a contract for more than 5 years, you can get a social tax deduction of up to 15,600 rubles per year.

You will not be able to earn directly on them, but to increase the amount of payments under the contract or reduce contributions quite.

And that's not all the ways to get the benefit, you can also earn. How?

Investment insurance

Another type of life insurance is investment insurance. It is an opportunity for high investment income and insurance protection. The main difference between the IHL and the UIH is that in the UIH the income is guaranteed and specified in the contract. With UHI there are no guarantees. 100% return only the amount invested, the rest depends on the stock market.

The premium is divided into two parts. One part earns, the other part lies and waits for the insured event.

Here you not only provide yourself and your family a stable future, but you can earn. Of course, if the market situation will be in your favor. And in order not to go broke and not to remain without funds, there is always a stable insurance part. Interesting?

Two more pluses - a special legal status and the right to tax benefits. It turns out that this is not a regular investment, but an investment with a privilege, because some of the money invested can be returned using the social deduction for personal income tax. Also, your insurance money will never be seized or taken away in a divorce, nor can it be seized or taken away in court. It's the most powerful asset protection there is.

What does life insurance provide?
So, with the types of insurance taken care of, what's the bottom line?

A voluntary life and health insurance policy will give you the following:

Confidence in your family's financial security;
Assistance in dealing with injuries and serious illnesses;
Financial support and care for your loved ones in case the worst happens;
The protection of your accumulated assets;
The security of money invested in savings and investment plans.
The question still arises - why insure your life?

It's everyone's personal choice to protect themselves and their loved ones with security, confidence in the future, and stability. If we compare life insurance and car insurance, because most often we insure cars, but life is not insured, although the consequences of accidents without life insurance can be much more terrible than an ordinary car accident, then it no longer seems so "optional". Take a responsible approach to this issue, and everything will change.

Remember the main thing:

Study the contract and the insurer carefully;
for risk insurance, choose as the insured one who earns more, that is, the breadwinner;
it is better to indicate the beneficiary children and loved ones, not yourself;
earlier is more profitable, start at 30 or 40 and get more benefits.
Life insurance is both a reliable safety cushion, a piggy bank, and additional income. What to give to yourself and your family in the end is up to you.

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