What Is Life Insurance?

Insurance companies help take the financial sting out of a loss of life by collecting money from the subscribers to the program, investing the amount, and distributing a sum of money back to the subscriber or to the subscriber’s estate after death.

Financially, most people can justify the cost of having some life insurance. Life insurance is one means of adding to or building an estate. Life insurance also acts as a protection against loss of the insured’s income or assets.

 

What Is The Purpose Of Life Insurance?

Life insurance is protection for dependants. Your dependants can include children, parents, spouse, or anyone who is dependant on you for financial support. In a sense, creditors are also “dependants” in that they are depending on you to repay your debt. So creditors can be added to your list of dependants. Your duty is to ensure that life still goes on well even without you.

Life insurance is not an investment nor is it a savings plan. The American Council of Life Insurance (ACLI), a trade association in the life insurance industry, said in an issue of their newsletter:

Life insurance is not designed to provide for the possibility of economic gain in return for a risked sum of money. That’s an investment. Nor is it designed to accumulate deposits of money building toward an individual or family financial goal. That’s a savings account. The purpose of life insurance is “to provide a guaranteed death benefit to protect your dependants against financial loss.”

Who Needs Life Insurance?

Someone may tell you that everyone needs life insurance. According to another ACLI publication:

Anyone needs life insurance if his or her premature death would result in financial loss to others or deprive them of a financial gain.

In other words, the need for life insurance depends on a person’s situation and most of the times, it applies to everyone of us.

Do you want to leave behind a huge amount of debts for your loved one after your death or you prefer to make sure that they can live life comfortably even after you are gone.

Related posts:

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  3. Why Should I Buy Insurance?
  4. Investment-Link Policy
  5. Whole Life Insurance