What is life insurance? Proper understanding of life insurance to ensure benefits
Although life insurance is not new, the questions of what life insurance is, the nature of life insurance, current types of insurance and life insurance benefits… are still quite new. with many people.
I. What is life insurance?
Life insurance is a product of insurance companies to protect people against risks related to health, body and life. Simply, the participant agrees and signs an insurance contract with the insurance company about paying the correct fees regularly into the financial reserve fund managed by the insurance company to get the most payment at the time of bad luck or maturity.
An insurance contract is an agreement between an insurance buyer and an insurance enterprise, whereby the insurance buyer must pay a premium, and the insurance enterprise must pay insurance premiums to the beneficiary or indemnify the beneficiary. insurance when the insured event occurs (According to Clause 1 – Article 12 – Law on insurance business).
The essence of life insurance is a safe way of providing financial protection for the future with the aim of replacing income sources when the participant encounters unexpected risks (life insurance benefits).
Therefore, life insurance is of great significance to human life, it not only helps stabilize life when unexpected risks occur, but also a way to share risks in the community by taking complement the few.
II. Types of life insurance
- Term life insurance is an insurance profession in which the insured lives up to a certain term, under which the insurer must pay the insurance premiums to the beneficiaries, if the insured still lives to the specified term. agreed in the insurance contract.
- Periodic payment insurance is an insurance business in case the insured lives up to a certain term; after that time limit, the insurance enterprise must pay periodic insurance payments to the beneficiaries as agreed in the insurance contract.
- Mixed insurance is a combination of term insurance and term insurance.
- Whole life insurance is insurance coverage for the death of the insured at any time during his or her life. (excerpt from Clause 12 – Article 3 – Law on insurance business)
In fact, in order for customers to easily access and learn about insurance, companies classify insurance products according to the actual financial needs of customers, for example, life insurance products. Manulife has life insurance, health insurance, education savings insurance, retirement savings insurance and investment products.
Currently, there are many people who do not really understand the product and insurance benefits correctly, so they have caused unnecessary confusion. So what is the correct understanding of life insurance?
III. Understand correctly about life insurance with the following 4 things
1. The main purpose is to protect against risk, not to save profit
Although life insurance still ensures future profitability like savings channels, the main purpose of life insurance is to protect against unexpected risks, so the profitability cannot be as high as when saving money. bank money.
Therefore, you should not compare insurance and savings or buy insurance from a good profit perspective. Instead, you should clearly define your needs to choose between the right risk protection insurance and the most profitable savings through insurance benefits.
2. As a long-term financial channel to prepare for the future
The future is a long way and it is not known yet what good or bad will come. So, the thing to do is to plan carefully at this point. One of the ways to provide long-term financial protection for the future is life insurance. Since the later years of life, the risk will be greater, so choosing to participate in life-protected products will help the insured always feel secure because there is insurance support.
3. Protects only against unforeseen risks, not pre-existing ones
When it comes to life insurance, it is impossible not to mention risks – unexpected bad things happen that cause loss, loss and danger to people. Insurance is associated with risks, but not all risks are guaranteed life insurance benefits.
Only risks that occur unintentionally causing damage to the health, body and life of the insured during the effective period of the policy are insured and paid. In addition, insurance will not cover risks that are intentional or inherent and present prior to the effective date of the policy unless notified and approved by the company.
4. Not having to protect against “all” risks
Not only life insurance, all insurance products have limited protection and do not protect against “all” types of risks. That is why before signing an insurance contract, participants need to know what risks they will be protected against, in which case each risk is paid, the benefits received how much and what specific cases will be excluded.
The policyholder should note that the insurance will not pay in cases such as death by suicide within 2 years, criminal offenses, HIV/AIDS or execution; cases of intentionally or intentionally causing harm, pre-existing diseases, cases of breaking the law….
It is not too difficult to understand what life insurance is, but if you want to understand more deeply, do not ignore important things to know around life insurance such as the nature of insurance, insurance companies, types or understanding. basic features to avoid confusion later.