One of the most important investments you can make in your family is life insurance. Now-one-moment-next-gone events, very unexpected for all of us, will leave your loved ones helpless and struggling to move on in life.
Life insurance, in addition, is also a way for family financial planning in that it provides some resources during times of hardship. However, taking out insurance requires some care so that everything goes well.
Want to know more? Keep reading to find out what a life insurance contract should entail.
What Is a Life Insurance Contract, and Why Is It Important?
An insurance contract refers to a legal contract formally entered into between an insurance carrier and a policyholder. It states that an insurer will want to pay an amount, called the premium, in return for the policyholder’s promise to provide indemnification against loss.
A claim may be any situation for which there is a forecast—that is, insurance coverage—we the insurer will pay for compensation if it occurs. For example, under car insurance, a crash may be an accident for which there will be compensation to the insured.
In turn, the life insurance contract follows the same idea of protection. However, its focus is on the physical integrity of the insured whose main risk, but not the only one, is that of an unexpected departure or his/her productive incapacity.
Life insurance is about supporting anyone’s greatest asset: their own life. Thus, among other functions, this insurance provides the necessary support to the beneficiaries indicated by the insured if, by chance, a sudden absence occurs.
Another very relevant insurance document in regard to the contract is the insurance policy. It is, in fact, a summary of the main contractual aspects relating to the relationship between the insured-to-be and the insurer. This being so, it becomes very important to be aware of these provisions of the life insurance contract.
What should a life insurance contract contain?
Since the life insurance contract creates obligations for you and should only be activated in the event of a claim, it is essential to know its contents well. To this end, take into account the aspects shown below. Follow along!
Your personal data
The first step is to check whether your personal data is present and accurate in the contract. To this end, check your full name, personal documentation, address and any other aspect of your qualifications.
Coverages
Coverage is the situations that characterize the loss, that is, those for which there will be compensation from the insurer, if they occur. You should always choose coverage that meets your needs. They must be explicit in the contract and appear in the life insurance policy.
Shortage
The grace period, when it exists, is the time interval between taking out the insurance and its coming into effect. During this period, you cannot count on the insured coverage, which is as if they were not yet properly activated. This is a legal authorization that may or may not be adopted.
Claims
In the world of insurance, a claim is an occurrence, that is, an actual event, for which there is coverage provision in the contract. It is after the accident that the insurance company must be contacted to begin the compensation process. If there is no coverage provided, an incident is not considered a claim.
Insurance premium
The premium in a policy is the consideration that the insured pays to the insurer during the contract period. Most of the time, these are monthly installments that shall not be ignored or forgotten, for they may lead to noncompensations in case there is a claim.
What are the main documents requested when hiring?
Every contract, no matter how simple, generates obligations between the parties. In the case of a life insurance contract , the insurer includes its own most important data and, at the same time, requests others to characterize the contracting party.
Therefore, you will be asked to provide documentation that demonstrates basic but essential data for a contract, especially insurance. Although each insurer operates differently, in general, the main data requested for contract composition are:
- an identity document;
- the indication of the profession;
- marital status;
- sex;
- the date of birth;
- marital status;
- information about health conditions (medical history).
In addition to all this process, if you have any questions, do not hesitate to ask your insurance broker and clarify anything that you did not understand. They will always be able to provide you with the best guidance, especially regarding specific aspects of the insurance company.
What should be observed before signing?
As you have already seen, the contract generates obligations and responsibilities that you must honor. Therefore, be clear about the contractual terms and be sure that the data is correct, so that it meets your interests of providing support for your loved ones.
In any case, before signing the contract, check whether all the main aspects mentioned above are present (coverage, waiting period, premium). In addition, once again, check whether the respective data is correct and consistent with your options.
Likewise, take into account the term of the contract (the duration of the contract), which is usually 12 months. Check the exact date it starts (remember that there may be a grace period) and the date it ends. In this sense, it is a good idea to check the day for payment of the premium each month.
Keep in mind that the hiring process must have started with the quote in partnership with an insurance broker you trust. Your broker’s experience will always be your best reference, since he or she is the one who brings you the best options on the market for you to choose from .
As you can see, the life insurance contract is an important investment, especially for the family. Take into account the peace of mind of knowing that your loved ones will be supported in the event of an unexpected departure from you or if it is impossible for you to continue with your productive activity.