What Is Life Insurance, And Why Do We Need It?

In simple terms, Insurance is a contract that you make with an insurance company to help tackle any unfavorable outcomes or events, during your life – such as being diagnosed with an illness or meeting with an accident, or in the event of your death.

Well, there’s nothing left for a person to do when he/she dies, but if the person has financial obligations or commitments, then the insurance money might help the family left behind in clearing off the dues or meeting their day-to-day expenses.

You enter into a contract with an insurance company by buying a policy that suits your lifestyle, current and future needs.

There are several kinds of insurance policies that you can buy, and many insurance companies to buy from, but the most important of all is a life insurance policy.

A life insurance policy provides a safety net for a person’s family in the event of his/her death, and is especially important if you’re the sole bread winner in the family.

We all have a family that loves us:

  • A spouse who has committed to share the good and bad with us for the rest of his/her life.
  • Children who depend on us during their growing years for food, shelter, education, health, and everything else.
  • Parents who have devoted a great deal of time, effort, and money in providing for us and making sure we’re well taken care of.
  • It falls upon us, then, to contemplate what would happen to them if we’re not around anymore, and plan for this contingency – to ensure that their lives do not get stuck up in the event of our death.

While there are different types of life insurance policies available in the market, the one that is simplest, and provide the most bang to you bucks is the Term Life Insurance policy.

Under this policy, you would pay a premium (every month, quarter or year depending upon your policy and your agreement with the insurance company) for a fixed term that could range from five years to twenty or twenty-five years.

If you happen to die within this term, the insurance company would pay out the amount agreed upon, to the named beneficiary.

What would Happen If You Survive Through the Policy Term?

Well, it depends.

Some insurance policies provide a survivor benefit, while others do not – but since the main objective of the Term Life Insurance policy is to provide for your loved ones in the event of your death, you need not be overly concerned about survivor benefits.

But, on the other hand, if you also wanted some money for yourself to help you in your old age if you survived the policy period, then you should look for policies that offer surviving benefits.

These policies would be a little more expensive than the ones that don’t provide any surviving benefits, and would be a better option if you can bear the additional premium amount.