Cumulative life insurance: what is it and what is it for

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Modern life of society is full of risks and all sorts of adverse situations. It is unrealistic to avoid them all, even observing all possible safety rules, counting things many steps ahead and carefully choosing actions. Many situations can undermine the prosperous existence of the person himself and his family, lead to bankruptcy, bring losses and losses. To solve these problems, there are several financial instruments, including endowment life insurance. This article discusses in detail the essence of the concept, features and purposes of registration, the content of the contract, as well as the organizations that provide this service.

Insurance as a term

All people strive to avoid adverse events. Naturally, it is impossible to absolutely protect yourself, but you can smooth out the "blow",providing assistance in the event of certain events. For this, an insurance contract is concluded between the insured and the insurer. Its essence lies in the fact that the organization providing this service, upon the occurrence of a specified incident, pays a certain amount to the insured. Thus, he has the opportunity to solve the problems that have arisen, without losing time, effort and money. An insurance premium is paid to the insurer for the provision of services. The situation may not occur, but the premium is non-refundable. Due to these payments, a cash fund is formed, from which the organization pays reimbursements to its customers. Naturally, the insurer also receives income from this fund.

The place of insurance in society

Insurance of life, he alth, property and even the possibility of certain events in the financial services market has existed for a very long time. The use of these products of financial structures is quite common and continues to gain popularity. Certain types of insurance have become mandatory. For example, compulsory he alth insurance and motor third party liability. When traveling, tours and excursions over long distances using a variety of vehicles (airplanes, buses, trains), the ticket price also includes passenger life and he alth insurance. When applying for a loan, mortgage, loan, banks often oblige borrowers to take out insurance. The latter cannot be strictly necessary.legislation, however, when refusing insurance, financial organizations in most cases refuse to draw up a contract for customers.

Many businessmen actively use the services of insurance companies to protect their business from the negative consequences of the economic crisis, dubious transactions, unholy partners. The amount of the insurance premium seems to be a much better option than the loss of all existing assets due to force majeure.

Who provides these services

Not every organization can provide insurance services. The state has a certain number of requirements for such companies: organizational and legal form, the number of shareholders, the size of the authorized and reserve capital. Like banks, insurers are subject to close scrutiny of transactions and financial transactions. If a substantial part of them is recognized as doubtful, the organization will have to say goodbye to the license for this type of activity. Due to the high requirements for financial security, the line of insurance products is most often offered by large banks and financial holdings. It is much easier for them to obtain permission for such activities. It is very difficult to enter this sphere just like that.

About life insurance

One of the most common insurance services is life and he alth insurance. You can insure yourself, a loved one, a child. The employer can insure under the same schemeyour employee. The essence of this procedure is that in the event of an insured event (death of the insured, serious injuries, disability, illness, accident and other incidents), the client will receive monetary compensation. This person is indicated in the contract. So, they can be the insured himself, or members of his family (in case of death). The contract can also include another person who is not related to the insured person by family ties.

The practice of using such services is most popular in Europe and the United States, but in our country it is gradually gaining momentum. Life, he alth and disability insurance is especially relevant for families in which only one person is the breadwinner or receives the highest salary.

Where used (compulsory and optional life insurance)

Life and he alth insurance can be compulsory and voluntary. Some insurance programs are provided by the state and are clearly regulated by it. Thus, structures such as FFOMS and TFOMS (federal and territorial compulsory medical insurance funds) are responsible for compulsory he alth insurance. Some professions require such insurance, as they are particularly dangerous activities with a high risk of injury of varying degrees.

In addition to compulsory insurance, there are voluntary programs. For example, endowment life insurance. No one has the right to oblige a citizen to usethis financial instrument. But every day more and more people consciously choose life insurance, ensuring the well-being of their loved ones in the event of an accident.

What does "cumulative life insurance" mean

In the market of insurance services there are a lot of products for every "taste" and budget. One of them is endowment life insurance. This program appeared relatively recently, but has already gained momentum and even got its regular customers. Its essence lies in the return of most of the payments to the insured. Thus, the client is not only insured against an accident, but also accumulates money through regular contributions to the insurance company. This approach is beneficial to both parties to the endowment life insurance contract. The organization still receives its insurance premium, and the client is confident in the future of his family, and also receives at the end of the contract the accumulated amount specified in it.

How funds are accumulated

Cumulative life insurance programs are a fairly complex financial instrument with many nuances that are not always available to an ordinary person, far from banking and insurance structures. The amount that the client will receive upon completion of the contract consists of several components. The policyholder pays most of it on his own (to an account opened for this purpose). Payments are made in equal installments, temporaryscope is limited by the duration of the contract. Typically, payments are made quarterly. Of the amounts paid, the organization's commission for the service provided is charged.

The rest of the money is not just lying around. The company uses them, issues loans, invests, uses them in economic activities. Depending on the results of financial transactions carried out, at the end of each reporting period, interest is accrued on the invested funds. It is due to these percentages that the accumulation and increase in the amount occurs.

Contract structure

Terms and conditions of endowment life insurance is a detail that should not be overlooked. The general structure of contracts in different organizations may be similar, but each of them has its own nuances. In some companies, the conditions may be more favorable. It is worth going around several providers of this type of service before deciding on the final choice.

A standard endowment life insurance contract of insurance companies contains several components: an insurance policy and annexes to it. Applications usually contain related information or additional services. Accumulative life insurance Rosgosstrakh is issued, for example, with a life insurance policy (aka contract), Appendix No. 1 describing the selected program, and Appendix No. 2 containing a table of redemption amounts by the terms of the agreement.

Content of the contract

For maximum coverage of possible events, the most complete reflection of its essence and inIn order to protect the parties from each other's misconduct, the insurance contract or policy, as well as its appendices, must contain detailed information on a number of parameters. In the endowment life insurance contract, insurance companies include the following data:

• Data of the policyholder, insured person, beneficiary. It reflects both the specific data of these persons, and the general provisions of who can act in their role.
• Insured events and risks, as well as the amount of payments when they occur.
• Term of the contract, after which the client receives the accumulated amount.
• Terms of payment of insurance premiums.
• Responsibility of the parties under the contract.
• The possibility of changing or supplementing the terms of the contract.
• Sharing in investment income.
• Terms of early termination of the contract.
• Other conditions made by agreement of the parties.

Cumulative life insurance: rating of companies

There are a lot of companies providing such services. Naturally, people prefer to contact the most reliable. When applying for accumulative life insurance, the rating of companies often plays a decisive role. Different sites, polls and statistical studies may provide different options for the sequence of popularity. But in most cases, the leaders of all ratings occupy the first positions, only slightly fluctuating along the lines. If you measure the popularity of programs by the number of insurance premiums collected, you can make the following list of top ten:

1. "Sberbank life insurance".
2. "RESO-Garantia".
3. "VTB Insurance".
4. "ALFA Insurance".
5. "VSK".
6. Ingosstrakh.
7. "SOGAZ".
8. Alpha Life Insurance.
9. "RGS Life".
10. Rosgosstrakh (IC PAO).

Pitfalls and reviews

When drawing up a contract of this kind, you should pay attention to a number of details. For example, how is the calculation of accumulative life insurance in the event of a preliminary termination of the contract. Usually, if the client has paid less than 8 insurance premiums, the savings are not issued. Only from the 3rd year of the contract can you count on some kind of payment. At the same time, it will be several times lower than the funds deposited during this period.

It is also worth noting that some life insurance contracts do not include insured events related to injuries. In this case, early payment can be made in favor of the client only in the event of the death of the insured. If you expect to include injuries and other accidents in the contract, you will have to conclude an additional agreement or an addendum to the policy. In this scenario, the amount of the insurance premium paid to the insurer increases.

As for people's opinions about the service, the reviews about accumulative life insurance are quite different in the spectrum - from unconditionally positive to categorically negative. The fact is that you should not sign this agreement if there is no financial stability, and in somemoment it may not be possible to make another payment. With constant delays, the insurance company may terminate the contract unilaterally without paying the redemption sums. The second point, with a small amount, it also makes no sense to contact the insurance company. The smaller the amount, the less the client will receive interest from investment activities. It may even come to the point that the amount received at the end of the contract will not overlap the contributions paid.