What is life insurance for? Easy-to-understand explanation of necessity, types, and key points when choosing insurance

①Death insurance in case of emergency

The first thing we will introduce is “death insurance” to prepare for emergencies. Death insurance is an insurance product that allows the beneficiary, such as the beneficiary’s family, to receive insurance money when the insured person dies or becomes severely disabled.
Death insurance is generally purchased for “protecting the lives of surviving family members” and “preparing for funeral expenses and expenses for sorting out belongings left behind.” The main types include term insurance, whole life insurance, and income protection insurance.

■Term insurance

Term insurance is death insurance that protects you for a certain period or until your age. There are two types of insurance period (period of coverage): one type that expires in years, such as 10 or 15 years, and the other type, which expires in age intervals such as 60 or 70 years old. Additionally, for term insurance that expires in years, it is common for the contract to be renewed after the expiration date ^*.

*Depending on the insurance product, there may be an upper age limit for which coverage will continue after renewal.

Image of term insurance

If you compare the insurance premiums for the same amount of insurance with whole life insurance, which will be introduced later, term insurance will be cheaper. Term insurance is death insurance that is suitable for people who want to prepare a relatively large amount of insurance money, such as those who want to leave a large sum of money for their families.
In addition, it is a so-called “disposable” insurance product, and if you cancel the insurance, there is generally no refund, or very little if any.

■ Whole life insurance

Whole life insurance is insurance that lasts your entire life until you die. There are two types: one type where premium payments end over a fixed period, and another type where premium payments continue for the rest of your life.

If you compare the insurance premiums for the same amount of insurance with the term insurance we introduced earlier, the premiums for whole life insurance will be higher. However, since you can receive coverage for the rest of your life, this death insurance is suitable for people who want to prepare for their funeral expenses and expenses related to rearranging their affairs.
Additionally, when you cancel your contract, you can receive a cancellation refund based on the length of the contract. ^*

*After the premium payment period ends, the surrender value may exceed the total amount paid. If you cancel your policy during the premium payment period, the total amount paid will most likely be less than the total premium paid, and you may not receive a refund if you cancel your policy within a certain period after signing the policy.

■Income security insurance

Income protection insurance is death insurance that allows the beneficiary to receive a fixed amount each month (or yearly) in the form of an annuity if the insured dies. For example, if a 30-year-old person takes out income protection insurance for the insurance period up to the age of 60, the insurance proceeds will be received as follows.

It is also possible to receive part or all of the insurance proceeds in one lump sum, but in that case, the amount will be less than the total amount received if received in the form of an annuity.
Income protection insurance is a type of term insurance, but the total amount of insurance benefits you receive decreases over time, so the premium is cheaper than term insurance.

*Comparing the total amount received immediately after signing an income protection insurance contract with the premium for term insurance that guarantees the same amount of insurance.

Like term insurance, this type of death insurance is suitable for people who want to prepare a relatively large amount of insurance money, such as those who want to leave a large sum of money for their families.

Other death insurance

In addition, there are “fluctuating interest rate deposit whole life insurance” whose interest rate is revised and fluctuates at regular intervals according to market interest rate trends, and where the insurance company invests the paid premiums mainly in stocks and bonds. There are also types of “variable insurance” in which the amount of insurance money and surrender value increases or decreases depending on performance.

②Medical insurance and cancer insurance to protect against illness and injury

■Medical insurance

If you incur medical expenses due to illness or injury, you can receive coverage from public medical insurance systems such as health insurance, so you can keep your out-of-pocket costs to a certain percentage. However, if you suffer from an illness or injury that requires hospitalization or surgery, the burden of medical expenses may put pressure on your household budget, or you may be forced to take time off from work, resulting in a loss of income. Medical insurance is insurance that protects you from such situations.

With medical insurance, if you need hospitalization, surgery, or outpatient treatment due to illness or injury, you can receive benefits such as hospitalization benefits, surgery benefits, and outpatient benefits depending on the contract details. There are lifetime products that are guaranteed for a lifetime, and term products that are guaranteed for a fixed period.

In the case of whole-life type medical insurance, the premium remains the same from the time you take out the policy. In the case of term-type medical insurance, it is possible to renew the contract with the same coverage once the insurance period expires, ^but the premiums after renewal are generally higher. This is because, at the time of renewal, the premium is recalculated based on your age and premium rate.

*Depending on the insurance product, there may be an upper age limit for which coverage will continue after renewal.

Medical insurance coverage varies depending on the insurance product, but examples include the following:

• Coverage that allows you to receive benefits if you are hospitalized for treatment of illness or injury
• Coverage that allows you to receive benefits if you undergo surgery to treat an illness or injury
• Guarantee that you can receive benefits after being hospitalized or if you visit the hospital for a certain period before and after hospitalization.
• Generous protection against three major diseases (cancer, heart disease, and cerebrovascular disease)
• Generous coverage for diseases specific to women
• Guarantee that you can receive benefits if you receive treatment using advanced medical care ^*

*Advanced medical care is defined by the Minister of Health, Labor, and Welfare as treatment using the latest medical equipment and drugs, as well as treatment using advanced medical technology.

The basis of medical insurance coverage is “hospitalization” and “surgery,” but there are products that can be more generously covered by adding various special provisions, medical insurance for women that generously covers diseases specific to women, and even short-term hospitalization. There are various insurance products and plans, including products that allow you to receive lump sum benefits.

■Cancer Insurance

Cancer insurance is a type of medical insurance that specializes in providing coverage for cancer.

Cancer insurance coverage varies depending on the insurance product, but examples include the following:

• Coverage that allows you to receive a lump sum payment when you are diagnosed with cancer
• Guarantee that allows you to receive benefits in the month you undergo prescribed cancer treatment such as anti-cancer drug treatment, surgery, or radiation therapy.
• Guarantee that you can receive benefits if you are hospitalized for cancer treatment
• Guarantee that you can receive benefits if you go to the hospital for cancer treatment
• Guarantee that you can receive benefits if you receive cancer treatment using advanced medical care ^*

*Advanced medical care is defined by the Minister of Health, Labor, and Welfare as treatment using the latest medical equipment and drugs, as well as treatment using advanced medical technology.

Even if you take out cancer insurance, it does not cover illnesses or injuries other than cancer.
However, cancer is a disease that requires long-term treatment and recurrence is not uncommon. There is a possibility that the financial burden during the treatment period will be heavy, so if you are “very worried about cancer” or “insecure financially,” consider signing up for cancer insurance. That would be good.

③Nursing care insurance for nursing care

As people grow older and need nursing care due to declines in motor and cognitive function, various expenses will be incurred, such as using nursing facilities, purchasing equipment necessary for nursing care, and renovating their homes.

There are two types of long-term care insurance: “public long-term care insurance” and “private long-term care insurance” provided by insurance companies.

In the case of public long-term care insurance, the basic system is “benefits in kind” such as the provision of nursing care services, rather than cash benefits. To receive benefits, it is necessary to be certified as requiring long-term care. You can receive nursing care services according to your certification level. However, 10% to 30% of the cost of using nursing care services must be paid by the individual (the proportion of the burden is determined according to the amount of income).

On the other hand, private long-term care insurance provided by insurance companies allows you to receive “cash benefits.” The conditions under which you can receive benefits vary depending on the insurance product. Some products are linked to the certification of long-term care required by public long-term care insurance, while others have their benefit standards. In addition, benefits are generally received in the form of a lump sum or pension.
Since you can receive the benefits in cash, you can use them in a variety of ways, such as paying for your expenses under public long-term care insurance, paying for home renovations, or moving into a nursing care facility.

There is also an insurance product called “dementia insurance” that specifically covers dementia.

Have a thorough discussion about what concerns you or your parents may have when you get older, and what kind of security you would like to have, and consider the option of “preparing for private insurance.” That would be good.

④Insurance for retirement funds

A typical type of insurance that provides for retirement funds is “individual pension insurance.”
Individual annuity insurance is an insurance policy in which you pay premiums in advance and, after reaching a certain age, receive an annuity or lump sum payment according to the contract details.

Public pensions such as the National Pension and the Employees’ Pension are public systems that provide retirement funds. Furthermore, by joining an individual pension insurance provided by an insurance company, you can further prepare for your retirement.

There are various types of individual pension insurance, such as “defined pension,” “fixed-term pension,” “life pension with guaranteed period,” and “couple pension.”

■Defined pension

After you start receiving your pension, you can receive it for a fixed period (5 years, 10 years, 15 years, etc.) regardless of whether the insured person is alive or dead. If the insured dies while receiving a pension, the recipient of the death benefit will receive the pension for the period not yet received (generally, it can be received as a lump sum instead of as a pension) ).

■ Fixed-term pension

A pension can only be received if the insured person remains alive for a fixed period, such as 10 or 15 years after the pension begins.
For products with a guaranteed period, even if the insured dies during the guaranteed period, the death benefit recipient can receive a pension (or lump sum).

■Lifetime pension with a guaranteed period

After the pension begins to be received, the pension can be received regardless of whether the insured is alive or dead during the guaranteed period specified at the time of the contract, and after the guaranteed period, the pension will be received for the rest of the insured’s life as long as the insured is alive. can do.
If the insured dies during the guarantee period, the recipient of the death benefit will receive the pension (or lump sum) for the guarantee period that has not yet been received.

■Couple pension

As long as one of the spouses is alive, he or she can receive the pension.
At the contract stage, it is common for the above-mentioned “defined pension” and “lifetime annuity with guaranteed period” to be changed to a “married couple pension” when the pension begins to be received.

After considering the expected amount of the public pension you will receive (you can check it on the regular Nenkin mail sent to you every year in your birth month), your savings, and other expected income in retirement, please consider the amount as necessary. You may want to consider signing up for personal pension insurance.

⑤Insurance for children such as “education insurance”

Life insurance for children includes “education insurance” and “child insurance.”

■Student Insurance

Educational endowment insurance is a life insurance product designed to prepare funds for a child’s education, and when the child reaches a certain age, the child can receive gift money or educational endowment insurance money ^*.

*The names of congratulatory money and educational insurance money vary depending on each insurance product.

The policyholder of educational endowment insurance is generally the parent (depending on the insurance product, grandparents can also be the policyholder), but there is usually an upper limit on the age of the child at the time of enrollment. You will no longer be able to sign a contract once your child grows up to a certain extent, so you need to be careful about that.

In addition, it is common for educational endowment insurance to have special provisions or special provisions for exemption from paying insurance premiums (or to have them added from the beginning). If the insurance premium payment exemption special clause (special provision) is added, when a parent (policyholder) dies, there will be no need to pay future insurance premiums, and you will be able to receive the gift money and educational benefits as planned.

■Children’s insurance

Children’s insurance is an insurance policy that allows you to receive benefits when your child becomes ill or injured and falls into a condition that falls under the coverage specified by each insurance company, such as going to the hospital or being hospitalized. There are also insurance products that combine education insurance and child insurance.

Advantages and disadvantages of taking out life insurance

Consider the following advantages and disadvantages when purchasing life insurance.

merit	Demerit
Can be insured against unexpected financial risks Inheritance measures can be taken Income tax and resident tax can be reduced	In the case of single-use insurance, you may end up not receiving benefits even if you pay the premium. In the case of savings-type insurance, the amount refunded upon cancellation may be less than the total amount of premiums paid.

From here, we will introduce each in detail.

3 benefits of buying life insurance

There are three main benefits to purchasing life insurance:

• Can be insured against unexpected financial risks
• Inheritance planning (use of tax-exempt limit for life insurance proceeds) is possible
• Income tax and resident tax can be reduced

Let’s take a closer look at each.

Advantage 1: You can be insured against unexpected financial risks.

One of the benefits of taking out life insurance is that you can use benefits and insurance money to cover any financial risks that cannot be covered by your savings.
For example, if you think, “If something were to happen to me, I would like to give my family around 20 million yen, considering education costs,” but if my current savings are around 1 million yen. , it takes years to save 20 million yen.
However, if you subscribe to 20 million yen of death insurance, from the day the coverage begins, you can leave 20 million yen to your family should something happen to you.
Of course, you will have to pay insurance premiums, but the fact that you can get the insurance amount you want right away is considered a big advantage of buying life insurance.

Advantage 2: You can take advantage of inheritance planning (use tax-exempt limits for life insurance)

When a person dies and an inheritance occurs, the inherited property is subject to inheritance tax.
Insurance proceeds from death insurance where the policyholder and the insured are the same are not inherited property, but are considered “deemed inherited property” and are also subject to inheritance tax. However, if the heir receives the death benefit, the amount up to “statutory heir x 5 million yen” will be exempt from taxation (tax-exempt limit for life insurance).
For example, if there are a spouse and two children, a total of three legal heirs, “3 x 5 million yen = 15 million yen”, and inheritance tax will not be applied to the death benefit up to 15 million yen.

In addition, when a family member dies, if there are multiple heirs, an inheritance division negotiation will be held to discuss how to divide the inheritance (inherited property), and the consent of all heirs is required for the agreement to be established. Who will inherit property that is subject to an inheritance division negotiation cannot be decided until the negotiation is over, and the heirs cannot touch the inheritance (inherited property).
However, the death benefit is considered to be the property of the beneficiary and is not included in the inherited property. Therefore, even if the inheritance division agreement has not yet been finalized, the beneficiary of the insurance money can file the claim on his or her own and receive the insurance money.

Advantage 3: Reduce the burden of income tax and resident tax

Once you pay your life insurance premiums, you can receive a “life insurance premium deduction” on your year-end adjustment or tax return.
Life insurance premium deduction is a system in which a certain amount is deducted from the policyholder’s income for the year, depending on the life insurance premium paid. You can reduce your income tax and resident tax burden depending on the annual insurance premium amount.

There are three types of life insurance premium deduction categories. In the case of insurance that receives insurance benefits due to survival or death, “general life insurance premium deduction”, in the case of medical insurance and nursing care insurance, “nursing care insurance premium deduction”, and in the case of personal pension insurance, “individual pension insurance” subject to tax deduction.

Two disadvantages of taking out life insurance

There are two possible disadvantages of taking out life insurance:

• With single-use insurance, you may end up not receiving benefits even if you pay the premium.
• When a savings-type insurance is canceled, the surrender value may be less than the total amount of premiums paid.

Each will be explained in detail below.

Disadvantage 1: With single-use insurance, you may end up not receiving benefits even if you pay the premium.

Most insurance products, such as term life insurance, income protection insurance, general medical insurance, and cancer insurance, do not offer a refund when canceling the insurance, or if there is, the amount is very small. Additionally, there is no maturity benefit at the end of the insurance period ^*.

*Depending on the insurance product, savings-type guarantees such as survival benefits and non-hospitalization benefits can be added or added as special contracts.

These types of insurance products are sometimes called “disposable insurance.”
For example, with term insurance, if the insured person does not die during the insurance period, the insurance benefit will not be paid, and even if you cancel the policy midway or the insurance period expires, you will not receive any money (even if there is very few). Therefore, even if you pay the insurance premium, if there is nothing, you will not get your money back, which is why it is called “disposable”.

Compared to savings-type insurance, which will be discussed later, it has the advantage of being cheaper in insurance premiums and providing more generous coverage, but it is important to understand that if nothing happens, you may end up paying just the premiums and not receiving any benefits. Please do so before joining.

Disadvantage 2: When canceling savings-type insurance, the surrender value may be less than the total amount of premiums paid.

Some insurance products allow you to receive a maturity benefit at the time of maturity (the expiration of the insurance period), or, like personal pension insurance and educational endowment insurance, you can save up the premiums you have paid and receive a pension or lump-sum benefit when you reach a certain age. There are insurance products that allow you to receive money. There are also insurance products, such as whole life insurance, which do not have a maturity benefit but allow you to receive a cash surrender value upon cancellation.
In this way, insurance products in which paid premiums are accumulated and can be received as insurance claims and benefits at the timing specified at the time of contract, and insurance products that provide a cash surrender value upon cancellation, are sometimes called “savings-type insurance.”

When it comes to using life insurance, it is possible to think of savings-type insurance like this as a means of building assets, but there is one big caveat.
This means that depending on the insurance product, plan, and timing of cancellation, the surrender value may be less than the total amount of insurance premiums paid. In particular, if the period from contract signing to cancellation is short, there may be no refunds at all.
Additionally, savings-type insurance tends to have higher premiums than single-use insurance. If it becomes difficult to continue paying insurance premiums and you are unable to continue the contract until its maturity, or if you cancel the contract earlier than planned, there is a risk that you will not receive the expected amount of maturity insurance money or surrender value. Please be careful.

Furthermore, when canceling your life insurance policy, there are some things to keep in mind, such as the fact that you will no longer have coverage at the time you cancel your life insurance policy and that depending on your physical condition, it may be difficult to re-enroll in the insurance policy. When purchasing savings-type insurance, be sure to carefully consider the coverage, plan, and balance with your household finances.

How to choose the right life insurance for you

The type of life insurance coverage you need will vary depending on your circumstances, such as your family structure and amount of savings.
When considering purchasing insurance, it is important to think carefully about the type of life insurance that is suitable for you. When choosing life insurance, keep the following three things in mind:

• Clarify the purpose of getting insurance
• Choose insurance according to your life stage
• Be aware of the balance between coverage and insurance premiums

Each will be explained in detail below.

Clarify the purpose of getting insurance

There are various types of life insurance, and the insurance product you should choose will depend on your purpose for purchasing insurance.
First, let’s clarify the purpose of getting insurance.
For example, if you want to prepare for emergencies such as death, you can enroll in “death insurance,” if you want to prepare for your illness or injury, you can enroll in “medical insurance,” and if you want to prepare for your child’s school fees, you can enroll in “education insurance.” It’s possible.
On the other hand, if you choose a product without clarifying your purpose for purchasing insurance, you may end up with coverage that is not necessary for you. As a result, your insurance premiums may be higher than expected, so be careful.

Choose insurance according to your life stage

As your life stage changes, the protection you need from life insurance will also change.
For example, if you are single, you will mainly consider insurance for yourself, such as medical insurance and personal pension insurance.
However, if you are married, have children, and are financially supporting your family, consider signing up for death insurance and generous medical insurance so that you can secure your family’s living expenses in the unlikely event of your death. is needed.
When purchasing life insurance, ensure that you have the necessary coverage based on your and your family’s circumstances, and then review your coverage as your life stage changes.

Be aware of the balance between coverage and insurance premiums

If you take out multiple insurance policies or add many special clauses to increase your coverage, your insurance premiums will increase accordingly.
Of course, it is important to be well prepared, but it is not good for high insurance premiums to become a burden on your household budget. When purchasing life insurance, it is important to consider the balance between coverage and insurance premiums when choosing a plan.

summary

Life insurance is intended to protect in the event of death, severe disability, illness, nursing care, etc.
The level of coverage that is highly needed differs from person to person, so be sure to choose the coverage that you need based on your and your family’s circumstances.

If you are unsure about how to choose or enroll in life insurance, we recommend using a comparison site where you can compare and consider multiple insurance products. You can easily compare by selecting the insurance product, age, and insurance period.