What is Life Insurance?

Life insurance refers to a contract made between an insurer and a policyholder whereby the insurer guarantees the payment of a death benefit to the specified beneficiaries of the insured in the case of death of the insured. The payment of the death benefit is based on the consideration of the payment of a premium by the insured.

How it Works?

The aim of life insurance is to offer financial protection to the beneficiaries of an insured after death occurs. Hence, an intending policyholder needs to analyze their financial status and determine the standard of living to the beneficiaries before making a purchase of the life insurance policy.

The death benefit which refers to the amount of money that the insurer guarantees to the beneficiaries of the insured upon a death is chosen by the insured based on the estimated future needs of the beneficiaries. The insurance company then makes a decision if the insured is eligible based on the underwriting requirements.

Usually, insurance companies offer riders to life insurance, and these riders allow for the customization of insurance policies according to the personal needs of the insured. Examples of these riders are accidental death benefit, waiver of premium rider, disability income rider, living needs benefit, accidental death benefit rider and so on.

Therefore, life insurance allows for flexibility and uniqueness of policy to individual insured, providing unlimited options to the advantage of the insured.

Life Insurance