Deferred capital is a type of life insurance by which the insurer agrees to make a payment to the contractor within an agreed term. This, as long as the insured lives on that date.
To put it another way, this coverage is like an investment that can end in a survivorship benefit.
Types of deferred capital insurance
There are two types of deferred capital insurance:
- Of periodic payments: The premium is distributed over time, in the form of constant or variable income, either temporary or for life.
- With a single premium: The insured makes only one payment when formalizing the contract. Said amount is equivalent to the net present value of the periodic payments that would have had to be paid under the method previously described.
Returns on policies with periodic payments
If the insured dies before the agreed date, a deferred capital insurance with periodic payments can contemplate two alternatives:
- With reimbursement: The insurer gives the beneficiaries the amount of the premiums already paid.
- No refund: There is no obligation to refund the rents already collected. In this case, it can be said that the individual who hires the coverage is running a greater risk than in the previous situation. Meanwhile, for the insurer it is the opposite.
Deferred capital in mortgage loans
Deferred equity is also a figure used in mortgages. It is used to defer a percentage of the loan principal towards the end of the financing period.
In the case of a loan of US $ 100,000, the debtor could defer, for example, 30% of that amount. So, the recurring fees will be calculated only on the basis of US $ 70,000. At the end of the indebtedness term, the outstanding balance must be canceled or renegotiated with the creditor.
The usefulness of deferred capital is that it allows the borrower to pay lower installments. However, in the end you must always repay the entire loan received.