Life insurance is a contract with an insurance company in which the Policyholder agrees to pay a premium, and the insurer agrees to pay capital to the beneficiaries designated in the policy in the event of the death of the insured.
Life insurance is an important instrument for your financial planning: protecting your family through life insurance helps your loved ones to be able to maintain their lifestyle even if you are not there to support them.
Who can be the beneficiary of life insurance?
The designation of beneficiaries is what you decide; they can be one or several beneficiaries, with equal or different percentages. The initially designated beneficiaries may be changed at any time and maybe persons other than the heirs.
If you have children or other family members dependent on your income, they are normally the beneficiaries of your insurance policy. You can also name an NGO, a creditor bank, or another entity.
Who needs life insurance?
I can’t think of anyone who may not need life insurance: anyone who has payment obligations for mortgages, personal loans, who have a partner, children, or dependents who depend on their income in whole or in part to meet their needs.
What if I don’t have family responsibilities or loans?
If you are from that small part of the population that is in this situation, perhaps your parents need help in their old age, and you are not there to provide it. Have you thought that life insurance can cover you for possible disabilities? Then you yourself will be the beneficiary with a capital that helps you maintain your standard of living if you can no longer work for health reasons.
What amount should I insure?
Can I have more than one life insurance?
Yes, you can have as many as you need, each one for the amount, term, premium, and beneficiaries you decide.
It is usual to have family health insurance that covers the outstanding amount of the mortgage; in this case, the beneficiary is usually a Bank Entity, but you can also take out life insurance that guarantees your children’s studies and another that can generate income to complement widow’s and orphan’s pensions.
What if I have enough money and don’t need life insurance?
Life insurance has many more advantages in addition to financially protecting the family; it can be used to create an inheritance since it can be self-settled independently of the rest of the hereditary estate so that the beneficiaries will always be able to receive the insured capital.
With life insurance, you can also leave an estate to people other than the heirs.
If a person has no income, why take out life insurance?
Not doing paid work does not mean that your contribution to the family does not have an economic value; a person dedicated to caring for children and the home does essential work, and, if missing, hiring people to do that work is very expensive. And the life insurance compensation could serve to cover that need.
If you have debts, life insurance is ideal for preventing the heirs from having to bear them in the event of death. In addition, life insurance is always charged, even if the heir renounces the inheritance.
Can my company take out life insurance for its workers?
Yes, then the figure of the Policyholder comes into play, who is the one who signs the contract and assumes the payment obligation, which is different from the Insured; who is the person whom the insurance protects.
For example, your company, within the social benefits that it gives to its employees, can take out life insurance in their favor.
Can a bank force me to take out my life insurance with them?
Absolutely not; the law supports you in this regard; you can get life insurance from the insurance company of your choice. Keep in mind that a comparative study of risk life insurance premiums, carried out by INESE, indicates that life insurance contracted with a bank can be up to 42% more expensive than with an insurance company.
Will I have to have a medical examination?
It is not usual, but it is possible that depending on the age and the capital that you want to contract, the insurer requests a medical examination before signing the policy. In this case, the cost of the medical examination and tests is usually assumed by the insurance company.
Does life insurance deduct tax?
The life insurance linked to the mortgage deducts up to 15% of the premiums together with the amounts destined to pay the mortgage and with the maximum limit of €9,040/year.
The conditions to be able to deduct taxes are that the mortgage loan is used for the main residence, the acquisition is prior to 2013, and that the beneficiary is the bank.
If you are self-employed, you can deduct, in the form of a reduction on the income tax base, the life insurance premiums that contingencies of death, permanent disability, or total disability, up to a maximum of €500 per year.
How will I know if a family member had life insurance?
All you have to do is request the information from the Registry of Death Coverage Contracts, dependent on the Ministry of Justice; this registry allows queries through three channels: online, in person, or by mail; access here to find out all the deadlines and documents.
How is life insurance compensation taxed?
If you have been the beneficiary of life insurance contracted by another person, the amount to be received will be taxed through the Inheritance and Gift Tax. Depending on the Autonomous Community of residence and the relationship between the beneficiary and the Policyholder, there are important deductions of a specific nature and in addition to the ordinary deductions of inheritance tax: thus, in the most common cases, a total exemption may occur.