What is Life Insurance?

In the modern world where surroundings and luck changes hands in the matter of seconds, it is almost impossible to predict the future. Despite securing an excellent job with ample benefits, the future for an individual and his family could be cast into shadow with any untoward events. This is where life insurance sets in filling the void set by the death of the primary money earner of a family.

Life Insurance can be defined to be a legal contract with an insurance company that promises payment of a pre-agreed sum of money to the family on an individual upon his death. The contract for this insurance is valid till the end of term or till the unfortunate untimely death of the individual. In short, life insurance does not guarantee protection against death for an individual; rather it provides an umbrella of financial well being for the family of the concerned upon his death. Life Insurance may be of two types, one being an universal policy which lasts till the death of the individual while the other is a term plan policy which is valid till for a certain amount of years which is touched upon during the time of preparation of the contract. Usually, one has to pay an increasing or constant premium over a length of time till his death and even though he may not have paid the premium for the total period, his beneficiaries are guaranteed the total amount in case of an untimely death.

With Insurance being a topic of hot activity in the market and billions and billions of dollars invested every in insurance, there is no shortage of insurance companies around the world. Life Insurance also has many fringe benefits, most of it associated with a universal whole life insurance plan. The premium paid every year may be used to acquire suitable tax benefits while one can also secure loans with ease if he/she has an insurance policy that has accepted the loan value. In many cases, the insurance policy itself is taken as cover for the loan. A life insurance plan can be profit or without profit based. In profit-based plans, bonuses are paid to the individual at different junctures during the contract phase. However, the annual premium to be paid is much higher in that case as compared to the non-profit based plans.

An earning individual is a significant asset to his family. A life insurance plan is the best cover for a family as it covers up all the required expenses such as education of the children, financial security of the family and a decent standard of living. While the emotional and physical void of the deceased cannot be totally compensated, life insurances go a long way in plugging in the financial gap left by the death of the bread earner.