Life insurance can serve you and can only serve the insurance company. That’s why it doesn’t matter what life insurance you have and how you have it set up. It is very important that you care about the choice of life insurance and its appropriate settings.
How to proceed with life insurance selection
I wondered how to simplify the process of getting a quality life insurance as much as possible. Finally, I summarized the procedure into 4 basic points:
- Choose insurance risks that make sense to your life insurance. Just choose what you really need in life insurance. Nothing more, nothing less.
- Set the amount of insurance premiums so that life insurance will provide you with adequate insurance coverage. It is as individual as selecting insurance risks. We are all in a different situation.
- Make a summary of offers from several insurance companies. If you do this on your own, then surround yourself all so that you don’t miss any that can be right for you. If you deal with a counselor, the comparison can do for you.
- Choose the most suitable life insurance from your offers. When selecting life insurance, take into account the exclusions, price and coverage of the insurance coverage.
What risks to choose for your life insurance
You can insure various insurance risks in life insurance. Most often you will find the following risks in life insurance:
- death insurance
- permanent consequences after injury
- permanent disability and illness,
- Critical diseases
- incapacity for work (daily compensation)
- hospitalization (hospital compensation).
Every life insurance is good to set up for a particular person or the whole family. There is no point in having insured insurance risks that are unnecessary for you. What is unnecessary cannot be generalized. It may be something different for everyone.
As a rule, the risks that cause a long-term loss of income are the most important. Conversely, the risks of short-term income loss are less important and it is much more effective to cover these risks with their own financial reserves.
How to set the amount of life insurance premiums
Correctly selected insurance risks alone are not enough to have a quality life insurance. Equally important as an insurance risk selection is the appropriate adjustment of the sums insured for your life insurance.
The sum insured for each risk must always be at a level so that you can cover your living expenses, liabilities and family by performing. By properly setting your life insurance, you can maintain your standard of living for yourself and your family. In calculating insurance amounts, it is appropriate to take into account the following:
- Loans and other liabilities
- subsistence expenses
- partner income and passive income
- the amount of savings,
- other property (real estate, securities)
- people who depend on your income,
- individual requirements.
Always insure your life insurance premiums to the current life situation to ensure you are sufficiently insured. In addition, you will only pay for what is really needed. That is why, when choosing, always take into account the flexibility of life insurance.
Never take the first life insurance. Make a bid overview.
Because life insurance is offered by quite a lot of insurance companies, be sure to make a list of offers from several of them. An overview of life insurance offers gives you the opportunity to choose according to your requirements. This allows you to achieve the ideal price and insurance coverage.
You can do a life insurance overview yourself, or you can reach your financial intermediary if you are also involved in life insurance.
Very likely there is an insurance company that will give you life insurance most suitable for you or one of them life insurance you may already have.
How to Choose from Multiple Offers That True Life Insurance
If you got here, you still haven’t won. You only choose one life insurance, even if you have more than 10 offers.
If you choose multiple life insurance, I recommend that you take into account the following when selecting your choice:
- The extent of the insurance coverage in order to have life insurance with the widest possible insurance coverage for your chosen risks.
- Exclusions in life insurance – the less they are, the better for you.
- The Life Insurance Prize – I don’t have to write anything more about it.
In theory, 2 to 3 of the best offers could suffice. However, the problem is that you do not have to hit the insurance companies for the first time, which can offer you a life insurance that has a chance to be shortlisted.
For example, if you have 10 bids, so eliminate the exclusion method at first sight. Keep moving until the last 2 to 3 best offers remain. It may be that shortlisted offers that differ only in details and are at a very similar price.
Then the details and detailed study of the conditions are decisive. Choosing as the main parameter price is not the best choice for quality life insurance.
What types of life insurance can you find on the market
Life insurance is a generic name that people use to name multiple product types.
Most often you may encounter these “life insurance”:
- risk life insurance
- capital life insurance,
- investment life Insurance,
- accident insurance.
Risk life insurance
It offers about the greatest flexibility. You can only insure your insurance risks and do not have to invest money in it. Gradually, as the financial literacy of people in Slovakia grows, it is becoming more and more common among ordinary people. From an economic point of view, just life insurance is the best choice in most cases.
Life insurance and investment life insurance
One and the other forces people to save or invest money. In addition to the insurance coverage, you must give extra money that the insurance company invests. There would be nothing wrong with it, but saving on life insurance is associated with high fees, which is not what you pay.
However, in some cases, life assurance insurance may be more advantageous than life insurance. This applies only to a certain combination of insurance risks and to certain groups of people and only to a limited number of products.
It is usually associated with the limitation of the collection of insurance risks and, in particular, there is a lack of death insurance in life assurance.
With whom you can advise on life insurance
It does not matter if you deal with your life insurance yourself or reach an advisor. It is essential that you choose the insurance that will solve your situation. Even if you deal with it on your own, life insurance will be awarded to someone who is authorized by the NBS.
You can find life insurance consultants on the market who fall into one of the following categories:
- Financial Advisor – here’s the least chance you’ll ever meet someone like that. I am referring to a financial advisor as defined by law. According to the NBS register, the market is almost non-existent. There are only two in the whole of Slovakia who have registration with the NBS (as of 29 September 2017).
- Tied financial agent – a person who can only provide life insurance from 1 insurance company. If you want to make a report, you need to reach them more and meet more. It’s more than 9,000.
- Bank employee – his disadvantage is that selling life insurance is just a marginal matter for him. Another disadvantage is the fact that it can offer you life insurance only from the insurance company with which the bank has a contract signed. Usually, this is just one related insurance company, so you will find it very difficult to review multiple life insurance policies.
- Subordinate financial agent – these are almost 16,000 on the market. They can provide you with life insurance from any insurance company with which their company has a contract. You can easily get from 1 Life Insurance Advisor from more than 10 insurance companies. What’s most important? Choose the right agent / broker.
How you can check if your financial advisor is doing life insurance
It is simple. If your counselor mediates life insurance, you can find it in the NBS register registered for the insurance sector.
Whether yours is there, you can check this link directly at the NBS. You can find it under his name or under the name of his business. E.g. You will not find me at the NBS as Jaroslav Ilek, but as ILEK sro with registration in all 6 sectors.
Life insurance as a theme is almost endless. On the one hand, I want to introduce an accurate system and sequence in providing information and, on the other hand, I want to provide as much information as possible.
So I decided to write about it in the next section of the article just as it would happen to me without some grouping of information under some life insurance insights.
I draw on the issues that I am getting into practice with clients about life insurance and draw on the experience I have gained during my 12 year experience. Although I want to write as much as possible about life insurance, I am aware that it is impossible. Simply what you won’t find in this article can be sent to you on request or by phone or in person.
Health questionnaire and life insurance
If you take out life insurance, always fill in your health questionnaire in your own interest so that everything is essential. Please do not make anything difficult. This can affect the quality of life insurance and claims.
Always tell the truth in the health questionnaire, even if it is just putting real information into it that can make it more difficult to take on life insurance and may also affect the price.
In my practice, I have met many times that people have a life insurance policy and have had serious health problems that have already been diagnosed before life insurance.
However, these facts have not been mentioned in the Health Insurance Questionnaire when concluding insurance. The insurance company did not know anything about it and therefore accepted it into life insurance as healthy people without exclusions, without surcharges and with full insurance coverage.
Everything is fine until the claim is settled. However, it is difficult for the insurer to cover something up, and the facts that you have not mentioned in the health questionnaire go to the surface when the claim is settled.
What can then follow? Refusal of insurance benefit or reduction of insured benefit if a direct causal link with the concealed status in the health questionnaire is demonstrated in the event of an insured event.
If you take out a life insurance, always fill in the full health questionnaire and ensure you not only life insurance, but also more certainty that in the event of an insured event you will also receive full insurance benefits.
When does an insurance company not have to take you into insurance?
The most common reason for an insurance company to refuse to conclude a life insurance policy is to state the health condition in the health questionnaire. When concluding life insurance, the insurance company may request additional medical examinations or require medical documentation.
After assessing the health risk, the insurance company can proceed to increase the premium for life insurance, set individual exclusions and can also completely refuse to accept life insurance.
Other reasons for which an insurance company does not need to take you into life insurance or accept you with lockouts or higher premiums are the pursuit of a risk occupation or professional performance of sports.
The good news is that there is almost always an insurance company that can offer you life insurance with good coverage, even under these difficult conditions. Sometimes it is just a question of life insurance.
What to do if an insurance company doesn’t want to take you into life insurance?
Insurance companies are different. Their attitude towards life insurance in relation to health is different. In particular, insurance companies prefer healthy people where the risk of insurance benefits is lower.
The most common procedure for assessing the health status of life insurance is to request complete documentation from the health card for diagnosis that you have given in the health questionnaire.
If this is not enough, the insurance company can send you for medical check- ups to update examinations or for an extended health check.
The risk assessment may also be an absolute denial to life insurance.
What can you do if your insurance company completely refuses to accept a life insurance proposal for health?
- You can ask the insurance company to reassess the risk assessment. To do this, however, you need to give some reasonable argument or a specific proposal that you are applying for.
- You can choose another insurance company that will take you to the insurance. There are several insurance companies in the market that can cover almost everyone. Although you pay higher premiums, it is better to have life insurance for higher premiums than not having any life insurance at all.
Track insurance claims and not just insured amounts
What am I writing about? It is not only the sum insured for which you are insured, but also the amount of insurance benefit that is not material.
The insured sum is the amount for which you have agreed life insurance, respectively. specific insurance risk.
Insurance indemnity is the amount you receive from life insurance for an insured event.
For which riders may the claim be of a different amount than the sum insured ? There are more. Now I’ll only mention the most common ones:
Permanent consequences with linear filling
Insurance indemnity is always exactly the same percentage of insured sum as the percentage of permanent disability. E.g. in case of permanent disability of 50% and 100,000 € insurance benefit is 50.000 €.
Permanent consequences after injury with progressive filling
If you have agreed in your life insurance to insure lasting consequences with progression, then previous mathematics does not have to pay. In the same case, ie the insured sum of € 100,000 and the permanent disability of 50%, the insurance benefit will be € 100,000 to € 150,000 depending on the insurance company. For progression,% of claims are higher than% of permanent damage from injury.
Death with decreasing sum insured
Here is a slightly different model than the insurance of permanent consequences after an accident. If you arrange this insurance for 100.000 € eg. for 20 years, as well as insurance benefits, but in this case, the sum insured also decreases by 1/20 every year. Why? Because it is a death reinsurance with a decreasing sum insured and it decreases over time. It is particularly suitable for credit insurance, where the loan principal decreases. The decrease may also be other than linear according to the selected insurance and according to the selected insurance company.
In this reinsurance, the entire sum insured is paid out after diagnosing a critical illness. This is what most people know. This is not always the case. Some insurance companies only pay a certain percentage of the sum insured for some insurance risks. It may happen that insurance companies are screaming at a high number of critical illnesses in their marketing, but they say nothing about a fraction of the sum insured for some of them.
If you are still picking up your life insurance, be sure to consider insurance benefits when making your choice so that you get the insurance that will help you deal with your life situation.
More people on 1 contract can mean saving on life insurance
Sometimes it was common for every household member to be insured on a separate life insurance contract. It is not so commonplace today. Several insurance companies have come with life insurance, where you can insure more than one person, respectively. your whole family.
At the same time, they also came up with premium reductions based on the amount of the life insurance payment. If I make it easier, the more you pay for 1 contract, the more discount you can get. Discounts range up to 30% of total premiums. Paying for a whole family of 100 € per month or paying 70 € per month is a huge difference. Only in 5 years it will make 1.800 €.
The insurance of several people on one life insurance contract does not offer all insurance companies. However, it is certainly worth finding those that offer such a possibility. Yes, there are specific cases where life insurance on 1 contract is not worth the whole family, but in most cases it brings more benefits.
Life insurance only insures what is really necessary
This is just my personal opinion, which is based on my pragmatic approach to finance and also to life insurance. It is not advisable to generalize without personal consultation and adaptation of life insurance to your situation.
I am in favor of making people pay for life insurance only for what is really necessary for them. Minor income cuts that can be covered by existing own financial reserves are not always included in life insurance. These may be short-term PNs, minor injuries, short-term hospitalization, and so on. These are the things people most want to insure.
Conversely, long-term loss of income, which has a major impact on you and the family, I recommend to cover it through life insurance. These may include risks such as disability, death of breadwinner, critical illness, and permanent consequences after injury.
I also do not recommend to cover life risks such as life insurance unemployment insurance, where the conditions for obtaining insurance benefits are set so hard that a person has a real difficulty in obtaining insurance benefits in those situations that may normally occur.
Life insurance can replace part of the financial reserve and passive income
Life insurance primarily serves to cover income loss due to an insured event that will reduce your ability to earn money.
If we look at it purely pragmatically, a sufficient financial reserve can almost completely replace life insurance.
If you want to be insured to protect / secure your family in the event of your death eg. for the amount of 30,000 €, so if you have a financial reserve of exactly the same amount, then this reserve will ensure exactly what you can solve through life insurance.
Another example. You have a property that will cost you € 300 each month, net of all costs and taxes. You are in the situation that even if you are not working, you still have an income of 300 € per month. This passive income allows you to reduce life insurance coverage.
Insurance is not primarily intended to earn power on it. First and foremost, it is to cover the worst scenarios, and it should provide you with a balanced standard of living even with some serious event.
However, if you have sufficient financial reserves or passive income, you can reduce your life insurance much more and thus save a fairly decent amount.
What can increase the cost of life insurance?
Anything that causes a higher risk of an insured event against which you want to insure your insurance. When I read it, it seems complicated and little spoken to me.
I will simplify it as much as I can imagine. The following may increase your life insurance payment :
- risky professions
- performing risky sports
- professional sports activity
- impaired health.
These are the most common things I encounter in my practice. I will not specify them in detail as there is a huge variety of variations. In addition to increasing your life insurance payment, you may be able to ensure that your insurance benefits are excluded.
Life insurance is not the most important parameter
I write it is not, but in fact people take it as the main parameter. Whether you like it or not, I can’t identify with it. The Life Insurance Prize is just one parameter on which I can choose from a life insurance comparison.
It is not true that the cheaper the better. Nor does it mean that a higher price is automatically higher quality.
When choosing a life insurance policy, your requirements (including price) and the quality of the insurance coverage (coverage and exclusions in life insurance) are crucial.
The price can only be charged if you have qualitatively comparable life insurance offers where the price is different. And here, the lower life insurance price is better than the higher.
Saving through life insurance is not a good choice for your wallet
High fees, lower transparency, low money availability and high fees again. The differences between investing in investment life insurance and regular investment in funds are so huge that I am afraid to write them down. It’s a difference in thousands of €. In the past I wrote about it eg. also in this article: “Comparison of Fees for Investing in IE and Directly into Mutual Funds”
If you don’t have to do what you usually don’t have, you don’t want to buy money in your life insurance. Your wallet will thank you for it and will leave you with more money for real investment.
Bank Loan Insurance life insurance in the insurance company
It is common practice that banks offer credit insurance automatically to mortgages. Oftentimes, banks condition good mortgage conditions by making life insurance through the bank.
Life insurance for mortgage, respectively. I consider credit insurance a good thing if it is justified for you. But what do I encounter when communicating with people? They take life insurance directly through the bank without studying the detailed conditions and comparing them with other life insurance offers.
What connects many bankruptcies?
- Only the principal applicant is insured. In many cases it is not possible to include a life insurance partner whose income loss may be the same disaster for the family budget as the main applicant’s income loss.
- Adequate health is not taken into account. The health questionnaire is often significant shortened, which can affect the insurance benefit or the bank worker does not give him enough emphasis and the client does not complete it completely. This can, of course, have a disastrous impact on insurance benefits.
- Insurance is sold in parcels. Pick up life insurance, respectively. tailor-made insurance is almost impossible. Insurance is often sold in different packages and if you want just one extra risk, you have to buy the whole package in which you buy even the things you don’t want in life insurance.
- Insurance benefits may be limited. Let me explain this on a concrete example. Insurance of lasting consequences through bancassurance is normally sold with cover, in which the fulfillment occurs only when a person has a permanent disability of 70% or more. If it has less, there is no fulfillment and the client has to repay the loan. In life insurance directly through an insurance company, performance can be as low as 1% of permanent disability from injury, which is a huge difference.
- For a similar price it is possible to get better insurance. I compared it several times for different clients, and in the vast majority of cases, the comparison of insurance coverage and life insurance prices spoke a clear language in favor of insurance arrangements directly through the insurance company.
Life insurance indexation = possibility to increase insurance amounts without examining health status
It seems at first glance to be a banality that is no advantage. This is what most people look at. These are people who are healthy and their health status has not changed fundamentally from the time they negotiated life insurance.
It is a huge advantage for people who have had a significant change in their health status after a life insurance arrangement. Indeed, when indexing life insurance, the insurance company does not examine the client’s health status. Insurance amounts are automatically increased and the client is thus insured for higher sums despite the fact that the insurance company would not have accepted it into the insurance at all in the current state of health.
When is it worth to have expensive life insurance
It’s a pretty common thing. A person who has life insurance comes to me and wants to make a change. He wants to pay less and at the same time have better insurance coverage than he has so far.
I can relatively quickly make a comparison of life insurance offers and then choose an offer to get the best penetration between insurance coverage and life insurance.
However, there are situations where it is worth keeping your life insurance. This is a bit related to the previous point. If your health status is such that a new insurance company or even the same one you are already insured will not take you to your new life insurance, you have only one option – to stay where you are right now.
The shorter the insurance period, the less you will pay for life insurance
Shorter time means lower life insurance premiums. The longer the time, usually the higher the premium. I am not suggesting that you are insured for a short period. It’s just information you can use in the future, and maybe not.
The price change depending on the time of insurance only applies to some components of life insurance. This applies, for example, to insurance against death, disability and critical illness. The insurance period usually does not affect the insurance of permanent consequences after an accident.
The greatest risk in life insurance for a shorter period is that you may need it for a longer period of time. If you want to arrange a new life insurance after you finish it, you have to count on the carnival time for some additional insurance as well as lockouts.
Exclusions may arise in connection with carriage times for certain insurance risks and may also result in exclusions due to changes in your health status. The worst possible scenario is that the insurance company does not have to accept you in life insurance after a change in your health.
Therefore, it may be better to take out life insurance for a period of time that is likely to require life insurance.
Old life insurance often includes insurance amounts too low
People normally have a life insurance policy from the past. Sometimes it happens that they are insurance contracts that have good conditions, relatively few exclusions and an acceptable price. It can be a life insurance that has a head and a heel and it is worth preserving it.
Most people who have a life insurance in the past, however, have insurance risks for too low insurance amounts that do not address their life situation at all.
It doesn’t matter what the reason for this condition is. What is important is that life insurance must always be adapted to the current situation in order to be well-designed and at the same time to be cost-effective. Insufficient insurance coverage disadvantages such life insurance.
What can you do? Set your existing life insurance in an insurance company where you already have an insurance contract (have your offer drawn up) and compare it with your competitive offers. Sometimes new insurance products offer life insurance, the parameters of which are better than the old ones in the past, and you can also get a better price for the same insurance coverage.
However, it is not a rule. Occasionally, old life insurance products also offer you the ability to set them up to be insured well and at a reasonable price.
Life insurance for children
Children are dependent on their parents. It is the parents who carry the income to the family budget, and thanks to them, the children have everything they need for their lives.
What is more important? Life insurance for children or life insurance for parents? The answer to this question is not clear to everyone. I personally advocate quality insurance for my parents. I look purely pragmatically to insure children. Life insurance for children is less important than quality life insurance for parents.
I myself am a father and have my children. I am not saying clear not for child insurance. All I’m saying is that parents must first have quality life insurance and only then their children. At the same time, life insurance for children can be set completely differently than insurance for parents.
For children, it is essential to put into life insurance those risks that can cause a significant loss of income for their parents, e.g. if the child would require day care. These can be serious diseases and permanent disability caused by serious injury. In my opinion, small business is not worth paying for life insurance for children.