Various insurances are a necessary part of life, such as car insurance for a driver in case of an accident or home owners insurance to cover the costs of damage to a home. In the case of life insurance, it is not always a necessity for every individual, couple or family.
While life insurance is not necessary, families who obtain it have a method of handling financial risks associated with death. The insurance is a type of contract made with the company. The company agrees to pay a specified amount of money, or the amount the insurance covers, in the event of the insured's death. The insured individual in turn agrees to pay a set amount called the premium each month or a large chunk some every six months or one year.
The reasons for obtaining a life insurance policy vary for different individuals. The most common reason to get a life insurance policy is to help supplement the financial needs of a family in the event a death occurs and the main source of income is lost. Another common reason is to leave a large sum of money to a family member, charity, organization or individual.
A term life insurance policy covers the individual for a specific period of time, or term, such as 10 years. If death occurs during the term specified in the agreement, the company pays the amount of the policy to the beneficiary. If a death does not occur and the term ends, the family must obtain another insurance policy or is not covered. It is typically the least expensive policy option.
A whole life insurance policy, or permanent life insurance, does not expire and is with the family for life. The premiums are more expensive, but it provides peace of mind that the family is covered at the time of death.
Some life insurance policies have income protection insurance available as well. The income protection covers the family in specific situations where the insured individual is not able to work for reasons like illnesses or accidents. Income protection as part of the insurance policy does not require a death before the family receives money.
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