Life insurance is a common life insurance policy that is used to cover financial losses associated with the death of somebody in the family (usually the household’s main earner). Under a typical agreement the life insurance companies will pay out a lump sum upon the death of the policy holder, and until their death or for an greed period of time the policy holder will pay a premium at regular intervals (usually every month or year), in to the policy. Although it is “life” insurance, many policies allow payout before death or for a pre agreed event such as a serious injury or life threatening illness like cancer. The main selling point of affordable life insurance is “what will your family do if you died.” It is a way of securing your family financially, should you die prematurely.
Unlike other insurance policies the holder of the policy is theoretically not around to receive the payout, thus beneficiaries (usually the next of kin or family) are written in to the contract, and they are the ones that will receive the payout upon activation of the term life insurance.
The value of the payout is determined by the premiums paid and the likelihood of death, rather than a specific value (i.e. in home insurance). Somebody that works a very dangerous job, or who is already seriously ill will have to pay much higher premiums than a young and healthy person.
Causes of death can unfortunately be debatable, so there are often different types of policy or clauses that rule out certain types of death. For example, suicide is often not covered, because the person took their own life. Accidental death is a type of life insurance that only covers death due to accidents, such as being hit by a car, rather than death resulting from illness.
There has been a debate about term vs whole life insurance so getting an online life insurance quote will save you lots of headaches. You can compare life insurance rates to help you chose the best life insurance policy or find a life insurance broker.