Life Insurance: an explanation please!

A life insurance policy is a contract between the policy holder and an insurance provider wherein the insurer agrees to pay out an agreed sum of money to the beneficiary of the policy.

There are many reasons why people invest in a life insurance policy, although a death is a time to grieve the loss of loved one, it can also be the beginning of great financial hardship for those left behind. The primary wage earner in most households will have a life insurance policy, so if there is a death, the life insurance payment will provide assistance in living circumstances going forward to the family.

Life insurance is often purchased by individuals but it is now also offered as an added benefit in wage packages by large corporations and government bodies. Unlike the individual costs, an employer generally incurs all the costs at no expense to the employee. The actual cost of life insurance can vary depending on lifestyle choices and can be more costly, if the insurance holder is 65 year old smoker rather than a 30 year old non-smoker.

The typical types of life insurance are:

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Whole life
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Variable Life
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Term Life