Insuring your life: life insurance could be one of the more important purchases you make in life. In this article we will outline the requirements of a basic life insurance policy and how the right life cover can be used to protect your family or business partners if the worst should happen.

Author:Donnellon, Brien
Position:MONEY
 
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In the event of a tragedy, life insurance proceeds can help pay the bills, continue a family business, finance your children's education, protect your spouse's retirement plans or repay a property loan.

Life insurance contracts tend to fall into two major categories: investment policies where the main objective is to facilitate the growth of capital by regular or single premiums, and protection policies such as term insurance, which typically pay a lump sum after a specified event.

In Switzerland if you choose a yearly premium you can invest in either pillar 3a or pillar 3b and include a disability pension and a premium waiver in the event of disability.

Other advantages include freedom to designate beneficiaries (flexible insurance plans), exemption from bankruptcy proceedings and advantages under inheritance law. The redemption value of third pillar (3a) life insurance can be cashed in or pledged to secure a mortgage for your main property, although not second homes. The redemption value of a 3b life insurance can be cashed or pledged without restriction.

How much cover?

In 1984, Switzerland introduced the obligatory company pension scheme to complement the state insurance. Almost every full-time employee is insured within the framework of a company pension scheme. Therefore, the first step in deciding how much coverage you need is calculating the cover already provided by the state and company pension insurance.

Unless a lender stipulates a minimum amount to cover a loan, the level of insurance cover is often a personal choice. A simple rule is to provide enough to pay your outstanding debts and funeral expenses.

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Therefore the level of cover should settle any remaining mortgage and debt. If, for example, you have young children, you could get enough coverage to pay your annual salary multiplied by the number of years until the youngest is no longer financially dependant.

What does it cost?

Buying insurance is often confusing and in order to compare policies by price, you have to be sure that each policy carries the same benefits for the same amount.

Aside from the amount of the death benefit you choose, several other factors affect the amount you pay for your policy. These include your age, gender, profession, the state of your health and any preexisting conditions, and whether or not you smoke. Smokers can expect to pay at least 25 per cent more.

Participating in dangerous sports can also increase the insurance...

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