![]() ![]() In a preliminary coverage the insurer pays out even if you die in the time between the acceptance and the effective date of the policy. With the purchase of a home you enter into a big commitment, which you may not be able to fulfil if you should die before you are actually the owner. If you sign up for life insurance because you’re taking on a mortgage, it’s important to make sure whether you are entitled to preliminary coverage. When you choose a higher rate than the mortgage interest rate, the coverage of the insurance decreases slightly slower than the mortgage debt. An annuity rate of 6% is parallel to a mortgage debt on which the interest rate would be 6%. If you take out a mortgage, it may be that the bank makes demands on the rate at which the decreasing annuity insurance is based. Did the mortgage debt decrease during the term to half the original amount? Then the coverage of the life insurance is also about half of the original sum insured. If you opt for anannuitydecreasing coverage, the insured amount decreases in the same way as an annuity mortgage. In alineardecreasing coverage, the coverage of an insurance policy of €300,000 with a maturity of 30 years, each year decreases by €10,000 (1/30 of €300,000). There are two ways in which the coverage may decrease. This is, for example, interesting if the distribution is parallel to an ever declining mortgage debt. If the insurance coverage is decreasing, the amount payable decreases in the course of time. If an insurance of €100,000 has constant coverage, then your relatives get paid exactly that sum if you die within the term of the insurance. This is a life insurance on the basis of so-called “one-year risk rates.” If there is a high probability that you will terminate the life insurance in the short term, this may be an interesting option.Ĭoverage Constant or decreasing coverage?ĭepending on the purpose of insurance and your wishes regarding the distribution, you can choose constant or decreasing coverage form. From the moment you take the life insurance, the premium goes up every year. ![]() It is also possible to pay a premium that depends on your age. Most life insurance policies which are taken out in the Netherlands are based on a premium that remains the same from the start to the end date of the life insurance. When you terminate the life insurance prematurely, the accrued value is paid to you. With a number of suppliers the excess premium that you pay in the beginning is put aside. In the beginning (low mortality) you actually pay too much premium and at the end (high mortality) too little. However, the premium you pay, often remains the same during the entire term. The risk to the insurer that the life insurance really must come to benefit, increases during the term of the life insurance. This clause does provide some degree of uncertainty about the level of the premium throughout the term. According to most conditions, this can only come into play if there are compelling circumstances, such as an impending bankruptcy of the insurer. This means that the insurer has the right to increase the premium in the interim. There is also an en-bloc clause included in the terms of a number of insurers. Especially for a short duration, this can be an important condition. Some providers offer, in the event of a declining life insurance (annuity or linear), an exemption from the premium in the last five years. Normally, you pay premium for the duration of the life insurance.
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