Basically, life insurance is a long-term investment and provides compensation in case of death of the Insured.
Usually the term of this type of insurance is 5, 10, 20, 25 or 30 years depending on the willing of the applicant for insurance. It is important to note that at the expiry of the policy, the insured person must not have reached the age specified by the Insurer, and in most cases the person must not exceed the age of 65.
The longer the term of insurance, the higher profitability the Insured could expect after its expiry.
The insurance provides not only a long-term investment, by paying the amounts paid for the term of the policy plus accrued interest, but also compensation to the heirs in case of death of the Insured during the term of the contract.
The sum insured or the amount that the insured will receive after the expiration of the insurance period is determined by the value of the premiums that the insured will pay to the company for the coverage period.
In addition to the main risk of this insurance – death, each Life Insurance Company has upgraded this product with additional risks (permanent and temporary disability; daily allowance for hospital stay, compensation for critical illnesses, compensation for surgical operations, exemption from paying premiums in case of disability, etc.), for which the Insured pays an additional premium, which does not go to the savings fund under the insurance but serves to cover the risk in case of an insured event.
This type of insurance product offers a higher return than the premium accrued over the term of the contract, but it should be borne in mind that depending on the consumer’s choice whether to invest in low-risk or high-risk instruments, the premiums paid may be partial or fully exposed to market fluctuations.