First off, let’s take a quick look at what Life Insurance is and how it works.
Plainly put, common Life Insurance is a long-term contract between yourself (the policyholder), and a Life Insurance provider. You agree to pay for the policy on a regular basis (these payments are called premiums) and in return, the insurance provider agrees to pay a sum of money (either a once-off lump sum or monthly instalments) to your chosen beneficiaries in the event of your death.
So, it works pretty much the same as any other insurance product would, except for a few small differences. The most important and obvious of these being that, in death, it is your family (or whoever else you may have chosen as your beneficiary) that will receive the insurance payment, and not yourself.
Of course, there are some exceptions, depending on the type of policy you have. Within those aforementioned parameters are many different types of Life Insurance policies and products to choose from, providing cover in different ways and from a variety of risks, depending on your needs. This could include the likes of additional funeral cover, or cover in the event of any serious illness or disability that would render the household breadwinner incapable of earning a living.
Because illness and disability is also taken into account, the costs of your monthly Life Insurance premiums are commonly determined by your risk profile (lifestyle, health, age, gender, and occupation), much the same way that vehicle insurance premiums are calculated, and these premiums may also be increased to enable a greater claim payout.
Life Insurance, in short, provides a long-term financial safety net for our loved ones, our business partnerships or even the charities and organizations that we are passionate about. Important life events, such as starting a business or getting married or starting a family, are opportune moments to look into acquiring these policies.
The grief of losing a loved one could become worsened by the task of having to tie up all the loose ends that person may have left behind, and Life Insurance payments allow the family to cover the costs of anything from day-to-day needs, education, medical expenses, businesses operations or any possible debt left unattended to. It allows them to continue living their lives without the burden of lost income.