What is life insurance? In simple terms, life insurance is an insurance policy that provides a lump sum payment upon the death of the policy holder. Having said that, life insurance has come a long way from what it used to be. Nowadays, life insurance policies are closer to investment vehicles, as in many cases the insurance company simply invests your premiums for either a lump sum payment or a monthly payment to begin at a predetermined time. Life insurance is no longer something for old people; it is an investment vehicle that can be used by people in all age groups.
Life insurance becomes a must for those that are looking to make a large, long-term financial commitment, such as purchasing a home. In fact, in many cases, mortgage lenders will require borrowers to take out some form of insurance, whether it is life insurance, personal accident insurance or some form of insurance as income protection in the case of redundancy or medical emergencies.
The reason for this requirement is that in the event of a death of the primary wage earner, the payments from a life insurance policy can be used to repay the mortgage, without burdening the surviving members of the household or requiring them to sell their primary home.
Having said that, a payment received from a life insurance policy can be used for anything you want, but most frequently, people take out life insurance coverage to provide money to their dependents as a means of income or to pay off outstanding debts.
Since life insurance policies are so varied and flexible, a good life insurance policy should also be able to meet your family’s or partner’s financial obligations for both the near- and long-term, such as funeral costs and inheritance taxes, but also long-term costs such as university tuition or retirement needs. This means that finding the policy that best suits your requirements, as well as financial needs is of utmost importance.