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How to choose life insurance: ABM

Insurance is an indispensable tool for our life and finances, however very few people make use of it, according to the Financial Education Committee of the Association of Banks of Mexico, 3 out of 10 people who died from COVID-19 had life insurance, faced with this new normal, this alternative of having life insurance becomes more important.

It is advisable to have life insurance despite not having economic dependents because life insurance has the ability to cover disability coverage, organic losses.

When choosing life insurance, an insured amount is required, which according to the Financial Education Committee of the Mexican Bank Association, should be two to three years of what the insurer receives annually.

“If a person has an income of 200 thousand pesos per year, the minimum sum to the contract will be for 400 thousand and 600 thousand, there is a period of three years so that during that time the economic dependents of the insurer itself can recover, and be it from an illness or recovery from work ” ABM.

In this area, there are several types of insurance that can be distinguished into three types of items.

Temporary insurance: The temporary insurance maintains a contract for a short period of two to five years, this guarantees the capital contracted to the beneficiaries in the event of the death of the insured, the premium with which the contract begins will be the one with which it is maintained and it will have an automatic renewal.

Endowment Insurance: guarantees economic compensation “in life” for the beneficiaries of the insured, so it is not subject to the death of the latter, it is generally used in educational insurance.

“Suppose you contracted endowment insurance for fifteen years, what will happen is that I will pay a premium, at the end of year fifteen I receive the insured amount that was agreed in year one if a death occurs before fifteen years the payment of the insurance is paid to the insured ”ABM.

Ordinary/whole life insurance: it extends its coverage during the entire life of the insured, without a specified term, involves the payment of premiums until the death of the user or for a specific term.

In the case of this type of insurance, the Association of Banks of Mexico recommends reviewing the table of redemption values, as well as the penalties for not paying the policy on time or for the early departure of the products.