Understanding Life Assurance in Spain Compartir

Author: Susana Dias

(article published in Canarian Weekly 19th March 2010)

Many of our readers have send emails requiring an article about life insurance. And the reason is that nearly everyone should have some form of life insurance, but what kind? How much, and for what price? How do you decide when the experts are the ones who are trying to sell it to you?

All of us have stopped one day to think about what may happen to the ones we love if we were to pass away unexpectedly? Or have you thought about the financial situation, that your family would find themselves in, should something happen to you or your partner? Do you wish to leave your children a legacy?  Perhaps you would like to leave a donation to your favorite organization? A cost effective life insurance could be used as part of your financial planning, to ensure security for your family, especially bearing in mind that the ones you love might be in a foreign country.
Life insurance is a form of insurance that pays out when someone dies. Normally you are never going to use a life insurance policy that you buy on your own life. After all, you will be dead when the policy pays out. Life insurance is therefore a gift that you give to someone else. Except your life insurance policy is complete and pays out in case of a permanent disability or a terminal disease. In both cases you would benefit from the total payout.
Compare life insurance to an automobile insurance policy, for example. If you wreck your car the insurance policy pays you a check, so you get a direct benefit from the policy. The chances of you being in a wreck are pretty good - you see wrecks every day. Finally, if you wreck your car it is not the end of the world. You will simply go and  buy another one. Automobile insurance is therefore a commodity item that you purchase without emotion - you have to have it. Not so with life insurance. If you do not know what life insurance is and why you do or do not need it, there are two things that can happen should you shop around for life insurance: you can be guided in to purchasing insurance that you do not need or you can be sold other components that are accessories to life insurance at inflated prices. As always try to find an insurance agent you can trust and avoid hiring these or any sort of insurances in your  bank:  they may try to convince you but most cases in case of a problem or a claim, they don’t know how to handle it.

What is Life Insurance?

As mentioned at the beginning of the article, life insurance is a form of insurance that pays a beneficiary in the event of someone's demise. You purchase a specific death benefit when you purchase the policy. You might buy a 100.000 Euros life insurance policy, for example. You then assign that 100.000 Euros benefit to a specific beneficiary, like your spouse. Should you die during the term of the insurance, then your spouse will receive 100.000 Euros . It is as simple as that.

Who Needs Life Insurance?

Some people truly need life insurance. For others it can be a waste of money. Let's look at some scenarios to see who does and does not need a policy.
Let's say that you are a single man or woman living alone in an apartment. Do you need life insurance? No. Who, exactly, would be the beneficiary? There is no one in your life who is dependent on your income.
But what if you’re the innocent victim of an accident and you stay in wheel chair for the rest of your life? So maybe a life insurance combined with an accident and permanent disability cover is the right product for you. Considering you’re single you’re better assured to have sufficient money available to hire someone to take care of you.
Let's say that you are a single man or woman living alone in a house with a 100.000 Euros mortgage. Do you need life insurance? Maybe. The reason you might buy life insurance is to save your parents (or whoever else you have left the house to in your will) the problem of disposing of your estate. For example, imagine that you die. Your parents (or whoever) inherits the house. Now they want to sell the house, but it sits on the market for two years before selling. During that time they are having to pay the mortgage payments, and that might be a hardship. Therefore you might buy a policy to cover the expected payments over (for example) two years, or the entire mortgage.
Let's say that you are a married man or woman living alone in an apartment or a house. Do you need life insurance? If your spouse does not work and you want to provide for your spouse should you die, then yes. If your spouse does work but could not possibly support his or her current lifestyle should you die (for example, could not possibly pay the house payments), then yes. Otherwise, probably not. Having life insurance would be a nice remembrance if you were to die, but it is not essential.
What if you have kids and you provide income that they depend on? Then almost certainly, unless you are rich enough to be "self insured", you need life insurance. Yes, yes, yes! You need enough coverage to allow your spouse and children to live a comfortable life in the absence of your income.

How much life insurance do you need?

The human life value is usually a higher number than what people come up with after considering what they'd like to be able to pay for if they were to die. I recommend purchasing insurance for somewhere between those two amounts. Though major life events, such as the birth of a child, marriage or divorce, usually mean it's time to update your insurance policy, many people forget to do so.
Naturally, when thinking in terms of financial stability, your thoughts may immediately go to the wage-earner. It's an obvious conclusion. However, other members of the family should be covered as well, particularly the primary caregiver or stay-at-home parent. Although the caregiver in your family may not provide income, the homemaking spouse has other responsibilities with value.  To calculate how much life insurance you need, you can use one of two approaches. You could estimate what you will make during the rest of your life and provide that. Simply take your yearly salary and multiply it by the number of years you have left before retirement. Using this approach you would probably buy way too much or too little insurance, depending on how much you make. The other way is to examine all of the expenses that your family will incur should you die, and account for them.

Does the policy cover something else apart from death?

Life insurance policies can be completed with several guarantees to enhance the scope of the cover, for instance:

• Advance of the sum required to meet burial expenses (in Zurich Policies, it’s automatically covered up to 2.000 Euros);
• Death by accident - if the death is due to traffic accident a double capital sum will be paid;
• Death by traffic accident - if the death is due to traffic accident a triple capital sum will be paid;
• Permanent Disability - In the event of total permanent disability, the compensation to be paid by the Insurer shall be determined based on the sum insured for such an eventuality and depending on the type of insurance agreed in the particular conditions.
• Permanent Disability due to accident - if you have a permanent disability due to traffic accident – a double capital sum if the insured becomes permanently disabled due to a traffic accident;
• Permanent Disability due to traffic accident - if you have a permanent disability due to traffic accident – a triple capital sum if the insured becomes permanently disabled due to a traffic accident;
• Temporary disability due to accident: a daily compensation for sick leave resulting from an accident depending on the option chosen.
• Temporary disability due to illness: daily compensation for sick leave resulting from illness depending on the option chosen.
• Medical care expenses due to accident, family cover - compensation for spouse and children under the age of 18.
• Among others…

You may be amazed at the peace-of-mind you and your family could have with the proper life insurance coverage in place. Evaluate your coverage options and get the insurance you need.

Susana Dias is the Director of TVT - the Zurich Insurance Agency in legally inscribed at the DGS (Direccion General de Seguros Española) with the number C0530B38657193 - more than 16 years providing excellent service.

Contact the Author for more information or to get a personalized quote