What is life insurance: how it works and when it’s worth it

Have you heard but really know what life insurance is?

Life insurance is a basic social protection offered by a provider and insured by an insurer, which guarantees financial protection to a dependent, in case of absence.

This type of protection is usually more popular in the family scenario, in which the provider contracts this type of service to guarantee a certain financial tranquility , in case of his death or other situations provided for in the contract.

To help you better understand how life insurance works and whether or not it is worth hiring, we have prepared this material with detailed explanations. Follow below.

What is life insurance?

During our life trajectory, some risks are experienced voluntarily or not.

It is impossible, even for the most cautious, to control the occurrence of unexpected situations. Unforeseen events happen and, often, the result is not the most pleasant.

To prevent situations like these from compromising job security and everything you have achieved, as well as your family’s well-being, taking out life insurance can be an interesting solution.

As we have already said, the concept of what life insurance is is a financial protection service for dependents, in case of lack of the provider.

But it must be clear that life insurance is not a type of investment, it is just hiring a financial security service .

How does life insurance work?

Protection is offered by an insurance company , which, upon payment of a monthly fee, also called a premium, allows a person to hire an indemnity service .

The insurance is divided into plans with different coverages, just as with medical insurance.

The greater the degree of risk and the number of dependents, the greater the premium.

The indemnity will depend on the financial plan of the contractor.

When closing a contract, the insurer guarantees that it will financially protect the family or whoever their dependents , should something happen that interrupts their income.

Here, it is worth emphasizing the importance of evaluating different insurers and knowing their offers, so the chances of getting more satisfactory coverage increase.

In addition to verifying that the companies are properly regularized and inspected by the National Private Insurance System ( CNSeg ), to ensure the security of capital.

In what situations can life insurance be used?

The activation of what is life insurance is guided by the conditions defined in the contract.

The main situations in which the indemnity is released are:

  • natural death;
  • accidental death;
  • accident disability;
  • permanent disability due to illness;
  • serious diseases;
  • daily hospital stay;
  • temporary disability benefits;
  • funeral assistance or assistance;
  • loss of income;
  • unemployment.

Life insurance can still be combined with other complementary insurance , such as:

  • coverage of educational expenses;
  • debt settlement;
  • Travel insurance;
  • housing insurance, among others.

There are also redeemable life insurance , where the amount can be withdrawn if necessary, even if the situation does not include such inconveniences.

It is part of financial planning and guarantees redemption, with interest and corrections , after a certain grace period.

The agreement with the insurer will define these conditions.

What are the most common types of life insurance?

Now that you understand what life insurance is, it is important to know the models available.

The most common types on the market are the individual and the collective .

In the individual, the insurance covers the risks of a single insured, the direct contractor of the plan, and is tailor-made, according to:

  • age;
  • Lifestyle;
  • profession;
  • interests.

This is a more expensive hiring option.

Already the group insurance is made by a company or union, which will be responsible for trading:

  • roofing;
  • guarantees;
  • insured capital;
  • product format.

Although it is more economical, as it is a generic insurance, it may not cover the needs of the insured as well, as in an individual plan.

Many companies offer life insurance as a corporate benefit .

How to trigger the life insurance indemnity?

To activate life insurance, just follow these steps:

Have the policy

The first step in how life insurance works is to have the policy in hand, as the document contains all the information in the contract, such as:

  • insurance coverage;
  • validity;
  • recipient;
  • triggering situation;
  • requirements;
  • general payment terms, among others.

Communicate the trigger

Then it is necessary to inform the insurer about the activation of the life insurance.

Pay attention to the deadline, as the beneficiaries have up to 3 years to request the release of the indemnity.

Counting begins on the date of the claim.

Deliver the documentation

After notification, the insurer must request the delivery of documentation that proves the occurrence of the claim and verify the identity of the beneficiary.

Receive compensation

According to the Superintendency of Private Insurance ( Susep ), after the delivery of the documentation, the insurer has 30 days to make the payment of the indemnity to the beneficiary.

For whom is life insurance worth it?

Life insurance is suitable for younger people, with spouses and / or children , who have not yet accumulated enough to make them financially comfortable in the event of an unwanted unforeseen event.

As the insurer calculates the premium based on the degree of risk, increasing age is a limiting factor.

Therefore, it is ideal to take out life insurance as soon as possible, so the contractor still guarantees higher insured capital and lower monthly fees.

For whom is life insurance not worth it?

It would not be an interesting hiring for young single people without dependents.

The best thing to do in this situation would be to save money , that is, to invest capital in order to increase your equity.

Financial education specialists can target this investment to ensure the best returns.

Among the main options are:

  • CDB ;
  • Direct treasure ;
  • VGBL ;
  • LCI and LCA , among others.

What is life insurance would also not be worthwhile for people who have already accumulated enough to leave their beneficiaries in comfort, maintaining the same standard of living.

Whether through the sale of goods or the income from investments, if there is sufficient capital, life insurance would not be a smart contract.

Life insurance is a protection service that can make a difference at decisive moments.

So it is a measure that must be considered carefully, if it is within your financial plans and conditions .

Its validity is in accordance with the coverage of the essential needs of its beneficiaries, so it is an importance that only falls to the contractor.

Life insurance, when done responsibly, can protect your legacy and your family’s well-being .


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