Contracting life insurance It implies more aspects to take into account than we can imagine. It is not something as simple as reading some conditions, making a signature and thinking that we are already protected. In reality, as insurers take care to emphasize, it is important to pay attention to the different existing conditions and select a type of life insurance that meets the needs of the moment. In relation to this, it is interesting to know what life insurance with increasing and decreasing capital consists of and why it is not of interest to contract it.
Life insurance with growing capital
The insured capital is increased each year so that in this way the “same insured purchasing power” is always available. In other words, if, for example, you take out a life insurance policy of €100,000 when you are 30 years old, each year the capital would increase and in 10 years you would have the same with the same purchasing power.
The condition that is incorporated for the increase in the economic figure depends on what has been agreed in the contract since:
- There are several types of growth from which you can choose based on your needs or taking into account the proposal made by the brokerage.
- The calculation of the capital increase can be geometric or arithmetic, although neither influences the amount of the premiums.
The flexibility of growing capital allows everyone to decide the way in which the capital varies.
For example, it is possible to determine that capital will grow based on what happens to a given market index, such as the Consumer Price Index (CPI). In this case, the insurance brokerage will use a TAR (Annual Renewable Temporary Insurance) so that the premium increases flexibly.
The increase in the price of the policy will occur in parallel to the increase in capital and in line with the CPI index, taking into account the natural growth in proportion to the mortality table.
In any case, experts have not recommended them for years and they are hardly commercialized. You have to think that our life does not change according to the CPI, but other totally unforeseeable circumstances intervene. In a few years our economic needs can vary from top to bottom due to job change, inheritance, the birth of more children, or because they have become independent and we already need less money.
Declining capital life insurance
They are usually associated with mortgages: the capital decreases as the amount of the mortgage loan. It is a good way to protect yourself while a debt is being paid so that a problematic situation does not arise that prevents you from ending up repaying this capital.
Each year it is adjusted depending on the principal owed on the mortgage
- The calculation of the capital increase can be geometric or arithmetic, although neither influences the amount of the premiums.
- Premium payments can also be made in a decreasing or constant manner, to offer flexibility and comfort to the insured.
Our experts do not recommend them because when we take out life insurance we do so with the intention of leaving the money to our beneficiaries and not to the bank, as is the case with this type of insurance.
With other life insurance, the heirs can decide what to do with the money, which may or may not include paying off the mortgage. It must be taken into account that if, for example, one of the two credit holders dies and the mortgage is at a fixed interest or there are only a few years left before its cancellation, it is more profitable to collect the life insurance policy and continue paying the installments to the bank.
In addition, with most life insurance, we leave money for our children even if the mortgage is already paid off. That is the purpose of these products: to protect our loved ones when we are not around to do it.
If you still have doubts about which type of life insurance is more interesting, you can find more information here or at elmejorsegurodevida.com. You can also ask for help from one of our experts by calling 91 218 21 86 – 932 990 416. Because when you understand what life insurance with increasing and decreasing capital consists of, you realize that both options are equally positive and it is each one who must assess what interests them most.
When choosing a type of life insurance, many details influence, such as the age of the insured, their profession, income, forecasts or if they have any type of active debt as a loan or mortgage.
The good news with life insurance is that there are so many variables and possibilities that there are always opportunities to find the model that best suits each case. After all, the important thing is to be able to ensure that we have protection.
