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Life Insurance is a contract between the policy owner and the insurer where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individual’s death or other event, such as terminal illness or critical illness. Insurance that guarantees a specific sum of money to a designated beneficiary upon the death of the insured or to the insured if he or she lives beyond a certain age. The goal of life insurance is to provide a measure of financial security for your family after you die. So, before purchasing a life insurance policy, you should consider your financial situation and the standard of living you want to maintain for your dependents or survivors. For example, who will be responsible for your funeral costs and final medical bills? Would your family have to relocate? Will there be adequate funds for future or ongoing expenses such as daycare, mortgage payments and college? It is prudent to re-evaluate your life insurance policies annually or when you experience a major life event like marriage, divorce, the birth or adoption of a child, or purchase of a major item such as a house or business. Insurance policy that pays a death benefit to beneficiaries if the insured dies. In return for this protection, the insured pays a premium, usually on an annual basis.Term Insurance pays off upon the insured's death but provides no buildup of cash value in the policy. Term premiums are cheaper than premiums for cash value policies. Such as whole life, variable life, and universal life, which pay death benefits and also provide for the buildup of cash values in the policy? The cash builds up tax-deferred in the policy and is invested in stocks, bonds, real estate, and other investments. Policyholders can take out loans against their policies, which reduce the death benefit if they are not repaid. Some life insurance provides benefits to policyholders while they are still living, including income payments.
Life Insurance offers a way to replace the loss of income that occurs when someone dies (usually the person who produces the majority of income in a family situation). It is a contract between you as the insured person and the company or "carrier" that is providing the insurance. If you die while the contract is in force, the insurance company pays a specified sum of money free of income tax — "cash benefits" — to the person or persons you name as beneficiaries.A good life insurance program does more than just replace the loss of income that occurs if you die. It should also provide money to cover the new costs that arise after your death –funeral expenses taxes, probate costs, the need for housekeepers and child care, and so on. And these cash benefits should provide for your family's future needs as well, including college education for your children and part or all of your spouse's retirement needs. In almost all cases, your beneficiary can use the cash benefits in the way he or she sees fit, without restriction.Some types of life insurance permanent life insurance policies — have a cash value that you can obtain by cashing out the policy or by borrowing against it. Though it can seem attractive, most financial experts agree that this feature should be seen as a secondary purpose of life insurance. Another type of insurance is term life insurance policies are available as well.