How life insurance works

Among all types of insurance services life insurance is certainly the most misunderstood and overlooked. People are ready to pay for having some of their most valuable assets insured such as house or car. However, when it comes to life insurance most people tend to think that it's a simple waste of money because they don't understand what life insurance is used for and how it works. If you are one of these people then you will definitely would want to learn how exactly life insurance works and what are the benefits of having your life insured.

Unlike other types of insurance, life insurance doesn't provide benefits directly to the policyholder. Because it is applied when the policyholder simply cannot receive any benefits at all. The initial name of this insurance service was death insurance and it reflected the essence in a precise manner. However, people had negative reaction to the word “death” and now it's called life insurance, yet the essence is the same. The policy pays out a pre-determined amount of money to the family or dependents of the policyholder in case the policyholder dies, gets terminally ill or becomes disabled. Now, some of you may wonder who will want such type of insurance?

Life insurance is best suited for people with families, children and important financial responsibilities. For example, a person takes a mortgage for a big house and moves in with their family. The person is the main income earner in the family and everything goes well until a car crash paralyzes the person. In such case the main income source is lost, the family starts to suffer financially, the mortgage isn't paid off and they are forced to move out of the house. With life insurance such situations can be avoided, since it's aimed at replacing the income of the main income earner after a catastrophic event. So, you can clearly say that life insurance isn't exactly for the person buying it but for people who they care about. Life insurance provides the necessary financial protection for the family or dependents of the policyholder in case something happens to him or her. It may also be used for paying off funeral expenses, mortgage and meeting other financial aspects of death.

There are different types of life insurance available with most insurers, each serving its purpose. So if you're interested in getting your life insured you will certainly find a product that will meet all you insurance needs.

How life insurance works »

How life insurance works

If you don't understand the purpose of life insurance make sure to read how it works.

Variable universal life insurance explained »

Variable universal life insurance explained

Learn more about variable universal life insurance policies and the benefits they provide.