Life insurance is a type of contract between an individual and an insurance company, where the insurer promises to pay a sum of money (a death benefit) to the policyholder's designated beneficiaries upon the policyholder's death. It serves as a financial safety net for loved ones, helping cover expenses such as funeral costs, debts, housing, and everyday living expenses. Life insurance can also provide peace of mind by ensuring that family members or other dependents receive financial support if the insured person passes away.
What Life Insurance Is For
- It provides financial security for beneficiaries after the policyholder's death by replacing lost income.
- It helps cover funeral and final expenses.
- It can pay off debts such as mortgages, loans, or credit card balances.
- It supports ongoing living expenses like housing, food, and childcare.
- It can be used to leave a legacy or charitable contribution.
- It offers tax advantages in many cases, as death benefits are often tax-free.
- It can protect dependents who rely on the policyholder financially, including spouses, children, other family members, or anyone financially dependent.
- Some policies also have living benefits , allowing access to funds in case of terminal or critical illness.
Who Needs Life Insurance
- Parents or guardians who want to ensure children are financially supported.
- Homeowners or renters needing to secure mortgage or rent payments.
- Business owners looking to protect against loss of key employees.
- Seniors wanting to cover final expenses or leave a legacy.
- Stay-at-home parents who provide valuable household services.
- Single individuals who have debts or co-signed loans.
- High-net-worth individuals for estate planning and tax-free wealth transfer.
Life insurance is typically purchased at significant financial milestones such as marriage, having children, buying a home, or starting a business to provide peace of mind and financial protection for those who depend on the policyholder's income or support.