Understanding life insurance is very simple, since its operation is quite simple. However, certain terms are used in the sector that can be strange if you have never done one. We review all the most common concepts, so that you have no doubts.
More than 20 million people in Spain have risk life insurance . That’s because it’s a useful and easy-to-understand product. But, as it happens in any professional sector, insurance uses some somewhat peculiar words. For example, at the beginning of the pandemic, strange words such as variant or antigens sounded familiar to us , since they are concepts typical of medicine.
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The basic dictionary to understand life insurance
For this reason, in this article we review some of the basic words necessary to understand life insurance. They are few and it is possible that you already know more than one. If they all sound familiar to you, you will not have any problem when you want to sign a policy to protect the future of your family.
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Prima
It is the money that is paid periodically in exchange for life insurance protection. The most common is that it is annual, but it can also be quarterly or semi-annual, for example.
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Borrower
It is the person who contracts the life insurance and the person in charge of paying the premium.
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Insured
It is the person who is protected . In other words: if she dies, the company will pay compensation. The policyholder and the insured are usually the same person, although this does not always have to be the case. For example, a company may be the policyholder of the insurance it has contracted for all its workers, but the insured are each of its employees.
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Coverage
They are all those assumptions in which the life insurance would act . can also be added Death is always covered, for any reason: illness, accident… But other coverage , that is, other circumstances that, if they occur, would make the company pay the agreed compensation.
An example of coverage is disability . If contracted, the insured receives compensation in the event of suffering an illness or accident that makes him request permanent disability or invalidity. Other coverage can be serious illnesses or triple capital due to a traffic accident , for example.
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Beneficiary
It is the person who will receive the compensation money if something happens to the insured. The most common is that it is a family member, but they can also be friends or even companies.
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Capital or compensation
It is the money that is contracted, that is, the amount that the beneficiary will receive if the insured dies.
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Exclusions
They are those risks that are not included in the contract , or particular circumstances in which the company would not take responsibility.
There are few exclusions on these types of products, and most of them are highly unlikely (wars, for example), so you don’t have to worry. Some of the most common are suicide during the first year of the contract or acts of recklessness.
Also, the exclusions vary depending on the company you choose. Therefore, the best advice is to have specialized advice to choose the product that best suits you and your circumstances.
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Right of withdrawal
When you sign a policy for more than six months, you have 30 days to cancel the contract without having to give reasons . This is established in Law 50/1980 .
This right can be useful, for example, in cases where a bank forces us to sign their life insurance to give us a mortgage. Although it is an illegal practice, it is still common, so it is important to know how to avoid it. You can accept the bank’s policy, which is twice as expensive as that of an insurer , sign the mortgage and cancel the insurance after 30 days. The bank will only be able to keep the part of the premium corresponding to the days that it has protected you (that is, less than 30 days).
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Grace period
Some insurances do not come into force at the same time they are contracted, but establish a period of time until they start, known as the grace period . Life insurance does not have a grace period , so it protects from the moment it is signed. This term is more common in cases such as health policies, for example.
Understanding life insurance is very easy
As you can see, the concepts we have explained are not very strange or difficult to understand. If you were worried about having trouble understanding the contract before you signed it, rest easy now. In addition, you can always contact our advisers to guide you throughout the process, to choose only the product you need, without paying more and with the right protection for you. Understanding life insurance is very easy: now all you have to do is find yours. Take a look at our comparator and you will be surprised!