by Plamen Doudov

Finding your way in the life insurance business may be tricky, but reading the small print will pay

Nobody likes discussing life insurance, be it in Bulgaria or abroad. Young people are either oblivious to it or simply don't think it is relevant to them. But at a certain point you become aware that one day something could happen to prevent you from being able to support your family. Well, you can't always be on the safe side. Part of planning your successful life in Bulgaria is getting insured against all kinds of eventualities. The most popular type of insurance is life insurance and this may turn out to be a good choice for you if are moving your life and career to Bulgaria.

There are two basic types of life insurance: risk and endowment. Think about insuring yourself as you would insure your car. I'm not being cynical, it's just that the processes involved are very similar. You pay a premium depending on the cover required. If an insured event such as disability or death occurs, the insurance company reimburses the insured or his beneficiaries with the full amount in the event of death or a percentage if you are unable to work. The sum is proportional to the loss of ability, or the risk of being disabled. The big advantage of risk life insurance is the low price and, of course, the greatest drawback is that you only get a payout in the event of a misfortune.

You should consider life insurance as a savings or investment product. You have already invested in your future by relocating to Bulgaria, so why leave the rest to chance? If you are committed to your work and your family, you are committed to your future in the long run. Endowment insurance is usually for a longer term and requires regular premiums for the duration of the insurance period. These payments might be monthly, annual, or paid in a lump-sum. Meanwhile, the insurance company invests the resources and makes a profit. At the end of the insured period you will get back the accumulated sum together with the negotiated return or part of the generated profit. If a claim is made during the insurance period, the beneficiaries will again receive payment of the full or partial insured amount.

The difference between risk and endowment life insurance is that with endowment schemes you get your money back and with some profit. Some insurance companies offer a single repayment, while others offer repayment in installments over a specified period of time. However, bear in mind that the premiums here are considerably higher than those for risk life insurance. Of course, you should also consider other investment options by comparing the returns and assessing the risks. A mutual fund could be a better idea, but there are new types of life insurance being offered on the market in Bulgaria which are linked to a mutual fund: the return on the endowment policy is linked to the return on a mutual fund of your choice.

Another big advantage of life insurance is the tax concessions in Bulgaria: up to 10 percent of taxable income. For example, if your annual taxable income is 5,000 euros and you take out an endowment policy for 500 euros, then you will not pay tax on that 500 euros. Income tax is about 20 percent and thus you will save 100 euros in tax, which could be reinvested in the policy to increase your cover. When the insurance policy matures, you will pay 12 percent tax on the accumulated amount only and not on the accrued interest.

When considering whether to purchase insurance, think about your life now. Most people consider life insurance as a way of taking care of their families and dependents in the future apart from the savings aspect.. Factors like living standards and quality of services are of more importance to the general public in Bulgaria than tax considerations.

You may wonder what amount to choose for your insurance cover. This is a very individual decision, but you may consider the following. First, think about your expected income over the insured period. You can get insurance securing the income fl ow. However, there is a problem with this simple calculation as current income usually does not equal spending during your active lifetime. So, you should include your expected expenses in the picture too.

Suppose you are paying a mortgage on your newly acquired holiday home at the Bulgarian seaside, your son is going to college in the UK in a couple of years, and your wife is pregnant with your third child. To calculate the insurance amount, you should not consider your expected income, but your expected expenses. Only then will you reach a realistic sum to ensure a continuous fl ow of income to your dependents. Choosing the right life insurance policy will help repay the mortgage and other debts, ensuring that your family will not face financial difficulties and will be able to maintain their current standard of living.

There are plenty of life insurance policies with varying premiums on the Bulgarian market and it might seem confusing when it comes to choosing the right one for you. You can get professional advice on life insurance from an insurance agent or simply use the Internet to gather preliminary information on the type of policies on offer, suggestions on the type of policy most suitable for you and what premiums to expect. It is always a good idea to research several life insurance companies and compare their policies. Note that premiums often vary from provider to provider, so you can choose the most competitively priced life insurance policy.

Premium Cover Term

  • Car Insurance 575 euros/year 10,000 euros 1 year, Own damage and compulsory TPL motor included
  • Life Insurance 480 euros/year 10,000 euros + 35 years, assuming you are in good health, aged 30-40
  • House Insurance 125 euros/year 30,000 euros 1 year, cover is based on the cost of replacing your property
  • Annual Cost: 1,180 euros
  • Note: prices are average and terms vary from company to company

You should also note that for life insurance of over 20,000 euros, you must pass a series of medical tests, which are required by the insurance company. These tests comprise a basic physical examination and urine and blood tests to begin with. Insurance companies are looking for signs of liver function problems, HIV antigens, diabetes, cholesterol and the like to assess your mortality rate. It may not sound pleasant, but this is their business, and if you are assessed as a high-risk candidate, they may turn you down. Insurance companies may not be willing to sign you up only to pay out the money in a short time.

For smaller amounts a general declaration of your health will do. Some insurance companies include health cover in the life insurance package. This entitles you to access to professional treatment in a private clinic, which could come in handy considering the generally poor situation of the public health system in Bulgaria. After all, life insurance is not only about financial security for your family in the event of your death. Having life insurance can also be of personal financial benefit as well. Life insurance policies which accumulate funds can be used to assist in retirement and build up personal wealth while living. You can take out an annuity life insurance scheme which offers you a stable fixed income after reaching pension age or simply becoming a certain age. After this age, in the event of your death your heirs receive part of the insured amount.

If you have decided to buy life insurance, you should consider it as a long-term investment. It's better to sign up while you're still in good health to avoid being turned down or charged considerably higher premiums. The longer the term of the insurance, the higher the cover guaranteed. You will enjoy full cover from the very first day of taking out your insurance. And your intuition is right when it tells you that the younger you are, the lower your risk coefficient, and so the smaller your premiums are. If you enjoy longevity, when your life insurance matures you will receive the full amount covered and the accrued interest for the period.

So, now you are ready to invest in life insurance along with your life in Bulgaria here are a last few pointers to follow. Always tell the truth on your application form, no matter how negative you feel it might be. If you are a smoker or a heavy drinker and you don't disclose your full medical history, your insurance cover may not be valid if a claim arises. This means that in the event of your death, the insurers are not legally obliged to pay out the claim. And as ever, make sure you read the small print. After all, it's your life you're talking about.


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