Life insurance guide: we know the types and prices

What is life insurance?

Simply put, life insurance is a contract you enter into with an insurance company. You, as the insured , pay a regular premium, and if something happens that is defined in the contract (such as death, serious illness or permanent disability), the insurance company pays out money to you or your loved ones. The aim is therefore to provide financial security in situations where you can no longer have a regular income from work.

But beware, not all life insurance is the same. They can be term life insurance, which covers only selected risks, or endowment life insurance, which helps you save as well as protect. For most people today, a combination of both is ideal.

Types of life insurance: risk versus capital

When you choose life insurance, you’ll come across two basic options: term life insurance and endowment life insurance. Each has its own strengths and weaknesses, and it’s important to know what you expect from insurance.

Term life insurance is “purely” protective. You pay a regular premium and the insurance company will only pay the agreed amount if an insured event occurs, most often the death of the insured. There is no saving or investing involved. The advantage is that risk insurance is usually significantly cheaper than capital insurance because it has no savings component, and focuses purely on covering risks. It is therefore suitable for those who want to provide cheap financial protection for their loved ones.

Equity life insurance, on the other hand , combines insurance with the option of saving or investing. Part of the premium goes to cover the risks, while the rest is deposited in an account that can appreciate in value. At the end of the contract or in certain life situations, you can then get back the amount saved. The advantage is therefore twofold: protection and building up a reserve. The disadvantage, however, is the higher price and the more complex product, which requires more attention when choosing.

Capital insurance is suitable for clients who want to both insure and save, for example for retirement or other long-term goals. Risk is better if you want clear protection at the lowest possible cost. It depends on your financial goals, age, ability and willingness to pay premiums as to what type of life insurance you ultimately decide on. The most common recommendations from experts are: if you want protection above all, choose term; if you want to insure and save at the same time, consider endowment.

What is the average cost of life insurance?

Now comes the less pleasant part – how much will you pay for it? The average cost of life insurance is not an amount climbing into the thousands, as some people think. Standard cover can be as low as around £500 a month for the average adult. Of course, the more insurance risks and the higher the amount you want, the more you will have to prepare.

The price depends on several factors:

• the age and health of the insured,
• the extent and type of insurance,
• the length of the contract,
• lifestyle (smoking and other risky behaviours make it more expensive).

Life insurance calculator

To avoid having to guess and believe advertising slogans, you can use a life insurance calculator. This will quickly calculate approximately how much you would pay and compare quotes from different insurers. Calculators are commonly found on the internet, not just on insurance companies’ websites.

With a life insurance calculator, you can also check that you have the right parameters – for example, the sum assured, the length of cover or if you already have some cover somewhere that you can factor in.

You can also take advantage of your employer’s life insurance contribution

Now a little bit about how you can make life insurance even “cheaper”. Did you know that some companies contribute to their employees’ life insurance? Employer contributions to life insurance are one of the popular bonuses that can help you save a few hundred a month. How does it work?

Your employer can contribute up to 50% of the cost of the premium to your private life insurance policy, without this amount being taxed as income to the employee (subject to certain conditions).

So when the company contributes, it’s like giving you money to be better insured. Your only obligation is to find insurance that your company will accept.

How does a life insurance death benefit work?

The main reason most people take out life insurance is because they want to have financial security for their family should the worst happen to them. A life insurance death benefit payout is a process where the insurance company pays the agreed amount to your heirs or those named in the contract.

The payout can either be in a lump sum or split in regular payments – depending on your contract and requirements. This financial instrument often helps to cover funeral costs, debts, mortgage or simply to provide your family with a decent standard of living.

How to choose the right life insurance?

Choosing the right life insurance is not rocket science, but it does require a little time and consideration. Here are some tips on how to do it:

1. Consider what you want to insure: Do you only need cover for the risk of death? Or do you also want coverage for illness, disability and extra savings?
2. Use the calculator: Get prices from several insurance companies.
3. Check insurance limits: Don’t overshoot, but don’t underestimate either. Think about the amount that will actually help your loved ones.
4. Consider the employer contribution: If you have one, definitely take advantage of it.
5. Read the terms and conditions: There are often exclusions that could take you by surprise.

Summary

Life insurance is an important financial tool that provides protection and security in the event of unexpected life situations such as death, serious illness or disability. The basic types are term insurance, which provides cover against specific risks without saving, and endowment insurance, which combines protection with the option of saving or investing. The average monthly cost of life insurance is around CZK 500, with the amount depending on age, health, the extent of cover and other factors. For a more accurate calculation, online calculators can be used to help choose the appropriate sum assured and duration. Another benefit can be the employer contribution, which is not taxable under certain conditions and significantly reduces the cost of premiums. In the event of the insured’s death, the agreed amount is paid to the beneficiaries, which helps cover liabilities and provide for the family. Choosing the right life insurance policy requires careful consideration of your needs, determining the appropriate sum assured, and studying the terms of the contract so that its effectiveness is not compromised. Overall, it’s an investment in financial stability and peace of mind that pays to be taken out early and wisely.