- Risk life insurance protects your family financially if you are absent
- Savings life insurance allows you both to save for retirement in different ways and to dispose of the savings generated
- You can choose the one that best suits your needs
Protecting yours is always a priority. There comes a time when you even consider doing it beyond the time you share with them. What will happen when I am not here? The idea that your loved ones should take care of you if you cannot take care of them because a serious illness prevents you from doing so often goes around in your head. To live more calmly in the face of these doubts, there is risk life insurance.
If what you are concerned about is saving for retirement, in addition to the well-known pension plans, there is a whole range of life insurance (life savings in this case) that allow you to do so based on your needs and objectives.
From the hand of the experts at VidaCaixa, we explain the details that you should look closely and take into account when you take out life savings or life risk insurance. We clear doubts and clarify concepts in case you are one of those who prefer to live a little calmer.
Risk life insurance
It protects against those misfortunes that only happen to others (death, disability or serious illness) by paying the stipulated amount to the insured person or their beneficiaries.
In Spain, one out of every six deceased leaves compensation to their loved ones. It doesn’t console the loss, but it saves them from having to worry about secondary details. In the case of serious illnesses, it guarantees an income so that the family can focus on what really matters.
What to watch out for?
- Choose the insurance that suits your needs. For example, temporary risk insurance may be of interest to people who are going to make a specific trip or to those who have a mortgage and want to pay off the loan in case it is necessary. If what you want is to guarantee the economic security of your family in case you die or are unable to work, whole life insurance is the product you need.
- Value well the income you want to cover. The insured capital is the compensation that the beneficiary will receive. To establish this figure, it is best to have the help of a professional and evaluate the personal situation, but it is recommended that the amount be at least three times the annual salary.
- Beware of the invalidity clause. Some life insurance policies provide financial compensation to the beneficiary if you suffer an unforeseen event that causes disability. It can be a very interesting protection.
- It clearly specifies who the beneficiary is or beneficiaries of the insurance, that is, who will collect the money in the event that the insured person dies. If the beneficiary is not left in writing, the compensation is given to the heirs, but to collect it they must do some paperwork and procedures that will take time and money.
- Don’t expect too much. If you are thinking of taking out life insurance, don’t leave it for tomorrow. The premiums increase as the insured has a birthday. In addition, over the years it is more likely that chronic or serious ailments will arrive, which would make premiums more expensive or make hiring impossible.
Savings life insurance
These insurances help you accumulate and grow your savings for when you retire. They allow you to contribute periodically and even invest in portfolios to give profitability to what is contributed. As life insurance, in addition to the piggy bank effect and the possibility of investment, they also offer death and disability coverage.
What to watch out for?
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Choose a savings insurance that suits your plan
To establish a retirement savings plan, the first thing is to set the objectives based on the time we have until the expected retirement date and the savings objective necessary to maintain your current lifestyle. The theory tells us that the longer that period we have until retirement, the more oriented our plan should be towards investing in equities.
Although it involves assuming some risk, it is the asset that offers the highest return in the long term. On the contrary, the closer we are to retirement; we must secure our savings by investing in fixed income. If you are still far from retirement, you may be interested in insurance such as Unit linked in which a part of the premium contributed is invested in portfolios linked to investment funds. VidaCaixa incorporates risk coverage linked to the evolution of the markets to give savers greater peace of mind. If you are just a few years away from retirement, you can opt for these other options.
Insured Pension Plans (PPA) are similar to pension plans, but in the form of insurance. They do not allow savings to be redeem until retirement, but they guarantee a certain return. They have a limit of 1,500 euros per year that can be deduct in personal income tax. The PIAS and SIALP are insurance policies design for periodic savings in which, if the investment is maintain for at least 5 years, tax benefits are obtain on the return generate.
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Personalize your insurance
Policies are not set in stone like the 10 Commandments. Life is changing and the insurance you take out must change to adapt to your needs. You can modulate your savings insurance, for example, by changing the investment portfolios in the unit linked – depending on whether it suits you to invest more in equities or more in fixed income. You can also add coverage when the time comes for the annual renewal if you consider it necessary. It is always interesting to assess it with an advisor.
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Being constant will be your best virtue
Periodic savings, no matter how small, play in favor of the saver when we talk about these financial products. Thanks to the magic of compound interest, the interest generated is reinvested to generate more interest. This helps you grow your savings with less effort.
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The sooner the better
In the case of saving, it is interesting to start with time because that way the effort is less to reach the objective.
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Think about how you will want to collect your money
It is just as important to save as to dispose of that saving efficiently. The way in which the money is rescue is decisive when it comes to knowing if the Treasury will be pay more or less. Life annuities are a form of savings life insurance that, in exchange for a single premium (which would be the capital save so far), guarantees the payment of an annuity for life. It has a beneficial tax treatment in personal income tax because it is only tax on the basis of savings a part of the life annuity base on the age of the client at the time of contracting.