What is life insurance: Complete guide on life insurance

What is life insurance: Complete guide on life insurance

Hire a life insurance it is synonymous with guaranteeing the future of our loved ones in the event that we die or, due to illness, lose our ability to work. Mainly, it is signed to offer financial protection or guarantee to those who could be left homeless in our absence: children, spouses, parents… Are you interested in knowing what life insurance consists of and what coverage it offers? Follow us and find out if you are the ideal candidate to take out this insurance.

What is a life insurance policy and what is it for?

As has already been mentioned, life insurance is a protection product offered by insurance companies with the aim of serving as a form of economic income for the beneficiaries of a person after their death.

As human beings we do not have the power to predict the events that may come. Unfortunately, death is one of them. Due to the pain that the loss of a person entails, it is often difficult for us to talk about it and leave things in order for those who will suffer our departure the most: our relatives.

Life insurance is one of those instruments that we can contract to ensure that, in our absence, the quality of life of our loved ones will not deteriorate for a certain time. Thus, it guarantees you the ability to pay for your children’s studies, pay off a mortgage loan, repay other loans, and more.

The amount of insurance will depend on the contributions made by the policyholder. The longer and the more money the insurer has been paying, the higher the amount that the beneficiary can claim.

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How life insurance works

Life policies have a fairly simple operation. We can say that the insured pays in exchange for the fact that, if he dies or something happens to him that prevents him from working and generating income for the support of his family, the insurance company pays compensation to the beneficiaries of the policy for an amount previously agreed in the contract. . In case of disability, the money can be received by the insured himself.

As for contracting, the process is simple: you will sign a contract with the insurance company as the owner. In said agreement, the company undertakes to pay the beneficiaries the amount of money stipulated in the contract when any of the previously established contingencies occurs.

When to take out life insurance

Most people think that life insurance is ideal only for people who have dependent family members or children. Nothing is further from reality!

Imagine that you lead an independent lifestyle and that, due to life circumstances, you are completely or permanently unable to work and continue to meet your financial responsibilities. Well, in these cases, life insurance would also allow you to have financial support.

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That is why there is no specific age to take out life insurance, although most people decide to take out this type of policy after they are 30 years old, motivated by the acquisition of economic responsibilities or the desire to start a family. In any case, making this decision will depend, mainly, on the particular circumstances of each person.

What is certain is that from the age of 50, life insurance complements very well with other types of insurance for organize the years of old age so that you can enjoy them calmly and without worries.

But regardless of this, the truth is that the importance of life insurance is not in doubt to guarantee your peace of mind, especially in the following situations:

when forming a family

35 is the average age at which we form a family, which represents one more reason to consider investing in whole life insurance, especially if the other members depend or will depend financially on you. In other words, if the illness or death of the person who financially supports the family represents a danger to the family economy, life insurance becomes a necessity.

When you take out a mortgage It is even more advisable to purchase a mortgage insurance when you agree to pay a mortgage, because in the event of your death your family will not only lose your salary, but will also have to face a long-term debt.

Coverage and types of life insurance

The most basic coverage of life insurance is death, however, it also serves to cover other types of risks such as temporary or permanent disability, partial or total disability and death due to special causes (accident or serious illness).

In the case of death coverage, which is the best known to all, insurance would mainly cover burial expenses and death capital, which is nothing more than the amount of money that the beneficiaries will receive in the event that the insured die.

In general, insurance companies offer different types of life insurance, but in general terms, we can group them into three broad categories:

family life insurance

They protect your family against risks that can generate economic damage. For example, in the event of the death of a family member, they cover burial expenses, they also protect children against being orphaned by accident and against other circumstances such as absolute permanent disability, disability due to accident, death due to a traffic accident, serious illness, among other.

professional life insurance

It is ideal for freelancers. If your family and your business depend 100% on you, this is the appropriate insurance to give financial peace of mind to your loved ones in the event of an unexpected event.

payment protection insurance

If you have mortgages, this is your indicated policy. It consists of protecting your relatives against possible bank debts.

Who’s who in life insurance

Before knowing what types of life insurance exist, it is advisable to understand who is included in a policy of this type.


It is the entity or insurance company that is responsible for paying the economic compensation to the beneficiaries of the policy.


It is the person who contracts the insurance. He does not have to coincide with the insured, although in most cases the person usually takes out life insurance for himself. In any case, it is possible to contract a life policy for our partner or children.


It is the person on whom the risk (death or disability) falls. If the policyholder takes out the policy for himself, he would also be the insured.


It is the person who will receive financial compensation from the insurance company in the event that the insured suffers any damage stipulated in the coverage of the policy. In the case of death insurance, it is logical that the beneficiary cannot coincide with the insured, but if we are talking about a disability situation, then the insured and the beneficiary could be the same person.

What must a beneficiary do to collect life insurance?

Not in all cases the beneficiaries are aware that the deceased had a life policy. It should always be the beneficiaries or relatives of the deceased who initiate the process that will conclude with the payment of the compensation of the policy.

The first step is to consult the Registry of Death Coverage Insurance Contracts. After proving the death of the holder, we will have access to the policy and the necessary data to claim compensation from the insurer.

With this information in hand, we can contact the insurer to find out if our name appears among the beneficiaries of the insurance and thus initiate the procedures for collecting it.

How is the sum of a life policy determined?

Deciding how much will be enough can be the most cumbersome part if you don’t have the help of a professional. The insurance company can make recommendations based on your creditworthiness, in addition to the debts and financial commitments that you have acquired with other entities.

In any case, it is essential that the agreed amount is sufficient for the beneficiaries to be able to meet their debts and expenses. Experts advise that this calculation be made taking into account 5 years of full salary. For example: if a person earns 30,000 euros per year, at least, he should insure 150,000 euros.

It is worth mentioning that the insurance company has the right to reject the contract in the event that the applicant is considered a subject of immediate high risk, either due to their health status, age or for legal reasons.


In conclusion, the purpose of life insurance is to protect the future of your family or of the people in your charge when they depend totally or partially on your salary or your savings.


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