LIFE-SAVINGS INSURANCE: 5 KEYS THAT MUST BE CLEAR BEFORE HIRING

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If you stop to think about it, saving is one of the most important decisions you will make throughout your life. A part of your well-being in the future depends on what you save today, and that is why it is not something to be taken lightly.

But saving is not easy. There are many different offers and products related to savings insurance, and most of us are not experts who fully understand the concepts linked to the act of saving.

What we have, then, is an environment of potential conflict: products that people need to buy if they want to save, but at the same time are difficult for those same people to understand. For the market to be efficient and not present problems, it is necessary to be transparent and fair with the client.

Transparency with life-savings products

How do you get that? Of course, with good legislation. However, since no one knows more about savings insurance than those who sell it, there is also another equally good way: let the savings marketers themselves analyze their products, conclude which are the most conflicting points of understanding, and coordinate to avoid misunderstandings and misinformation.

The latter is what happens in the case of Spanish insurance. Life insurers, which are the ones that sell savings products, have come together to reflect on what are the things that a saver should be clear about, yes or yes when thinking about buying savings insurance. And they have put them in a Good Practices Guide by which they are forced to work for that clarity.

 Five keys to understanding savings insurance

What are the things that insurers are committed to making clear? The following:

1. First and foremost, insurers undertake to make it clear to you whether or not you can lose what you are putting in by buying this or that product. The savings are invested in financial assets, and the assets can go up or down in price. The key is in who is assuming the risk that prices drop and, for example, if you put 1,000 now, you have 900. There are products in which that risk is assumed by the insurer and others in which that risk is assumed by you. The first thing the insurer makes sure of, then, is that you understand to whom the loss falls if it occurs.

2. When the savings insurance has no loss for the client (what is called guaranteed savings), it can happen that this guarantee operates only if you save during the entire time stipulated in the contract. For example, you can think of a product that guarantees what you put plus a certain interest if you get your money back when you retire, but not before. It may happen that if you recover the money beforehand – that is, if you get out of the car in the middle of the trip – your insurer will not maintain the guarantee. That is why the insurer is obliged to make the conditions of the guarantee clear to you if you recover money earlier than expected.

3. There are products on the market, in fact, that are illiquid until a certain point in time. They are retirement products (the insurance is called the Insured Pension Plan), and, according to the law, you cannot receive them (recover your money) until you retire or certain special circumstances occur. To prevent you from buying one of these savings insurances when in reality you do not want to save in such a long term, insurers are obliged to make clear to you the condition of illiquidity of the insurance.

4. In the case of savings insurance received as income, that is, in periodic payments, it must be taken into account that there are many types of income, and depending on the type, what is charged each month varies, as well as what is the heirs will receive if the beneficiary dies. That is why insurers undertake to make it clear under what conditions and in what amount these rents will be collected, including what the heirs charge.

5. Lastly, in the case of profit-sharing SoClean insurance, in which a minimum return is guaranteed, but more can be given under certain conditions (the most normal, that it has been a good financial year and taken out more than expected from investments), the Good Practice Guide obliges insurers to clearly explain to their potential client how these benefits are calculated, and how they are distributed.

Several basic rules, then, that seek to guarantee that any client who leaves with life-savings insurance under his arm knows what he is getting, what he can expect, and what not from the contract he has signed. Clear things.

By aamritri

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