Learn all about the different types of life insurance

There are different types of life insurance, which means that choosing the right one isn't always easy. Understanding how they work and what coverage they offer is the first step toward making the right choice that meets your needs.

As you read our article, you'll learn about the main types of life insurance and what they're for, what they cover and how they work, as well as how to evaluate the coverage options.

What Are the Main Types of Life Insurance?

Generally speaking, the purpose of life insurance is to provide financial protection for the insured person and their beneficiaries in the event of death or disability caused by illness or accident.

By sharing or transferring the risks to an insurance company, the insured person mitigates the impact of premature death or a longer life span, which entails increased costs—related to illnesses, for example.

The Life Insurance They can be classified, above all, according to their purpose. In this case, there are two main types of life insurance:

– For personal and family protection;

– For asset protection – these are linked to loans, the most common of which is a mortgage.

There are also other types of life insurance associated with loans, such as those related to personal loans. This type of life insurance can be purchased when you want to buy a car, for example. Another type of life insurance is group life insurance, which is offered by companies to their employees.

What Are the Different Types of Life Insurance Used For?

Life insurance, as a general rule, serves two main purposes: personal and family protection, and safeguarding real estate. Regardless of the type of life insurance we’re discussing, the impact on the lives of policyholders is real, with benefits for everyone involved. Let’s take a look:

Life Insurance for Personal and Family Protection:

As we have seen, this type of life insurance guarantees the payment of a benefit in the event of death or disability caused by an accident or illness. Thus, it provides:

Financial stability

From a personal protection perspective, life insurance provides greater financial stability by ensuring your financial independence. Why?
In many cases, when faced with a disability, the insured person is deprived of a source of income they had come to rely on. The compensation paid will ensure their financial independence, which will help maintain their quality of life.

Your Family's Well-Being

From the perspective of family protection, life insurance ensures the well-being of your household. Take a look:
In the event of your death, your family members (or the beneficiaries you designate) will receive the payout. Even if you’re not around, this financial support will help ensure the well-being of the people who matter most to you.

Mortgage Life Insurance:

This This type of life insurance is taken out when a mortgage is obtained. Although it is not mandatory, banks require customers to purchase this insurance. Thus, Mortgage Life Insurance allows you to:

Guarantee of Payment for a Mortgage Loan

In the event of death or disability, the debt associated with the mortgage on the property is paid off, ensuring that you remain the owner of your home. This way, your financial stability and that of your family is preserved.

Property Protection

By ensuring that the debt is paid, you protect your property, which allows you to maintain your quality of life and that of your family.

Whether to protect yourself or your family, or to safeguard your property, life insurance ensures financial stability during difficult times, making it easier to overcome challenges.

What coverage do the different types of life insurance provide?

The coverage options are related to the protection provided by life insurance. And these coverage options vary depending on the type of life insurance you wish to purchase.

Analyzing the coverage options helps you identify the best types of life insurance. We’ll now explain how the coverage works and which protections you should pay special attention to.

Death:

This is the basic coverage for any type of life insurance. With this coverage, the insurance company pays the benefit in the event of death resulting from an accident or illness.

Disability:

There are two main types of disability coverage: Absolute and Permanent Disability (IAD) and Total and Permanent Disability (ITP).

Absolute and Permanent Disability (IAD):

Compensation is paid when, as a result of an accident or illness, the Insured is permanently unable to engage in any type of paid work. It is also necessary that the Insured person rely on the assistance of others to perform basic daily activities, such as eating, feeding themselves, or getting dressed.

Total and Permanent Disability (TPD):

This coverage is more comprehensive than IAD and therefore offers greater protection. Under this policy, compensation is guaranteed when, due to illness or accident, the Insured is unable to perform their professional activities in accordance with their qualifications. The degree of disability must exceed 60% or 65% (depending on the insurer), generally following the criteria set forth in the National Disability Table.

Accidental Death:

This coverage guarantees the payment of an additional amount on top of the insured amount in the event of accidental death.

Death from a Traffic Accident:

In the event of death due to a traffic accident, an additional amount is paid in addition to the insured amount.

Serious Illnesses:

When a serious illness is diagnosed, compensation is guaranteed. The list of serious illnesses includes cancer, stroke, and heart attack, among others. In the case of some serious illnesses, such as cancer, this financial support can be very important in helping to pay for treatment and ensure a better quality of life.

How can you evaluate the coverage provided by different types of insurance?

What makes one type of life insurance better than another is the level of coverage it provides. A good life insurance policy is one that offers maximum coverage, with minimal exclusions, at a fair price.

To find out which life insurance policy is best for you, simply request a life insurance quote.

The final decision is up to you. But there are many reasons to trust EXS:

• Has more than 25 years of experience;
• It ranks among the TOP 10+ in the Financial Services and Insurance sector (2020);
• It ranks among the TOP 5% of Portugal's Best SMEs.