Life insurance refers to the contract between an insurer and a policy owner
. It is based on mutual agreement between the insurer and the insured. The policy holder pays regular premiums on an agreed time in return for compensation from the insurer upon his or her demise.
One can have pure life insurance which only compensates for the death of the insured and cash value insurance which accumulates cash value over time to enable benefits to be paid to the insured before death. The latter is generally regarded as a saving plan. Life insurance also allows for replacement of the policy holder even though replacing or selling of a policy is often discouraged.
This type of insurance is also classified into term life insurance and whole life insurance. Term life insurance pays benefits to the policy holder within a specified time initially agreed upon. Whole life insurance on the other hand requires you to pay a fixed amount of money in a premium paid each year in your entire life.
Life insurance is perhaps the most misunderstood type of insurance. Most people tend to avoid it purely on mythical grounds. Some assume that it is enough to just be life insured thinking that the future expenses of their families are fully catered for. You need to obtain other types of policies which can guarantee your family sustainability in future.
Some who don't have a permanent source of income think it is not necessary to have life insurance. If you have a family it is advisable to get yourself and your spouse insured. This means in case one of you dies, the other is not left with the unnecessary burden.
One paramount thing though is what you need to consider before buying life insurance. First you need to evaluate yourself and the needs of your family. You need to know whether you really need a life insurance cover or not. Then question yourself how much you need, the best insurer and whether you can afford it. Whichever company you choose, find out from different reliable sources the company's record of paying premiums.
It is also important to note that you may be single and without a family but you still need life insurance. This is essential because depending on what policy you hold, you may stand to benefit even before you die. What's more, the policy may cover your funeral expenses.