What savings and life insurance is

Did you know there was a product that combines the benefits of life insurance and savings plans? Find out about savings and life insurance here

What is important when taking out insurance is, firstly, thoroughly evaluating your personal and family situation, to then choose the insurance solution that is best suited to your needs. To do so, you must analyze the economic impact that your death or incapacity may have on you and your family, and whether you need to add to your retirement to maintain your current quality of life. As such, whereas it may suit some best to take out life insurance, other will be more interested in a savings plan. However, there is a solution that combines the benefits of both products: savings and life insurance, which allows you to insure your life while also saving regularly.

If you are interested in this product, you're in luck! You've found what you've been looking for! In this article, we'll explain how this product works by describing the two products that combine: savings plans and life insurance.

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Life insurance

Life insurance is the classic insurance product. With insurance of this kind, the policyholder pays a premium so that, in the event of death, incapacity or severe illness, they receive a financial indemnity established in policy for the insured capital. This is the classic insurance product used by the self-employed and heads of families who want to protect their loved ones financially against any unforeseen events.

Premiums for these insurance products vary depending on the policyholder's age and can be high so the policyholder and/or their family can maintain their standard of living if any of the contingencies covered by the policy occur.

Life insurance products are products of risk, so you pay a premium to insure you against the detailed contingencies in the policy, within the established period. As such, the premium paid does not generate or constitute a saving, as it is established purely to cover the stipulated risks.

The savings plan

The savings plan, perhaps together with life insurance, is the other “classic” of insurance companies. It consists of an investment plan in which the policyholder regularly pays in cash amounts and, like a piggy bank, they produce yields across time. The purpose of savings plans is very similar to that of pension plans: people usually deposit money in these types of plans so they can access funds in the future in order to supplement their pension (or other similar product).

However, there are two major differences between savings plans and pension plans: how long they last and how they are taxed. Unlike pension plans, savings plans do not need to be linked to retirement, as their term will already have been specified in the contract (5, 10, 20 or however many years as the customer wants). As regards taxation, savings plans are subject to income tax and may or may not be tax exempt depending on the specific product, while pension plan payments are taxed as earned income.

Can both products be combined? Of course! That's what savings and life insurance is.

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Savings and life insurance

Savings and life insurance is, precisely, the marriage of a savings plan and a life insurance policy. They enable regular contributions, which can be changed or paused should you need it, but they are also products that offer liquidity at all times, since the capital can be partially or fully recovered, and in the event of a death while the policy is in force, the saved capital is collected in addition to the additional yield generated. The capital of these products is guaranteed by the insurance compensation consortium. The savings accumulated in this insurance product can be recovered in a single payment or in regular life annuity payments while the payee is still alive.

There are different types of savings and life insurance products (Individual Systematic Savings Plans, Individual Long-Term Whole Life Insurance,...), which are basically more advanced savings plans with a better tax status than generic savings plans. Another example is the Guaranteed Pension Plan (GPP), the purpose of which is to contribute to with a pension tomorrow and guaranteeing the capital reached on that date with absolute security, with stable yields and beneficial tax treatment, to allow you to deduct part of the contributions you make to the plan.

This is the case, for instance, of the "PPA Acumulación" Guaranteed Pension Plan offered by BBVA: you contribute to the plan based on a level of return secured in advance, and when you retire you can choose to receive all the capital you've accumulated in a single payment or move funds to other savings products so you can receive life annuities that are both tax and fee-free. You can also deduct a portion of your contributions early.

This is a serious offer and each individual must choose the product that best suits their lifestyle and risk appetite. Go to BBVA.es to find out about our insurance products and, above all, discover which product you feel most comfortable with.

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