What is Life Insurance

What is Life Insurance?

Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the “benefits”) upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (the “premium”) at regular intervals or in lump sums. In some countries, death expenses such as funerals are included in the premium.

Buying life insurance may be one of the most important decisions you’ll ever make. In the event of a tragedy, the assured payout can help pay the bills, continue a family business, finance future needs like your children’s education, protect your spouse’s retirement plans, and much more.

What is life insurance anyway?

‘Life Insurance is like a parachute. You buy it when you don’t need it, because when you need it, you can’t get it !!!’

There are a few variations of life insurance policy. In this article, we will try to further understand what is life insurance all about.

• Term Life insurance-The most popular type of life insurance policy is called Term Life Insurance. The term life insurance provides coverage for a specific and stated period of time. This type of life insurance is a very popular choice for a policy because it can be purchased for an inexpensive premium. The way this insurance works is that you are covered by the policy for the time period specified.

• Whole life insurance polices, on the other hand,  are attached to a cash value system where part of the regular contributions are invested in funds of your choice and grow with time. If the cash value is high enough to sustain the policy, it can be used to pay the premiums.