A life insurance policy provides financial security for beneficiaries after the policyholder’s death. It helps cover expenses such as funeral costs, mortgage payments, and lost income.
The National Association of Insurance Commissioners (NAIC) explains:
“Life insurance is a legal contract between an individual and an insurance provider. In return for regular premium payments, the insurer agrees to pay a specified death benefit to the policyholder’s designated beneficiaries.”
Types of life insurance policies explained
There are several types of life insurance policies, each designed to meet different needs:
Term life insurance – Provides coverage for a specific period, such as 10, 20, or 30 years.
Whole life insurance – Offers lifelong protection and includes a cash value component.
Universal life insurance – Features flexible premiums and potential cash accumulation.
According to Forbes:
“Term life insurance is usually the most affordable choice, while whole life insurance builds cash value over time, making it an option for those seeking long-term benefits.”
Who benefits from life insurance?
Life insurance is useful for:
Parents who want to ensure their children’s financial stability.
Homeowners with mortgages who want to prevent financial hardship for their families.
Business owners looking to protect their company’s future.
The Insurance Information Institute (III) states:
“Life insurance can provide a crucial safety net for families. It helps replace lost income, pay debts, and fund future expenses like college tuition.”
Policy duration – Decide between temporary or lifelong coverage.
Premium costs – Compare rates and benefits across multiple providers.
The American Council of Life Insurers (ACLI) advises:
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“Consumers should carefully evaluate policy terms, premium costs, and potential exclusions. Consulting with a licensed financial advisor can help identify the most suitable plan.”
The process of obtaining life insurance typically includes:
Assessing financial needs and determining coverage.
Researching policies and requesting multiple quotes.
Completing a medical exam if required.
Reviewing and finalising the policy agreement.
NerdWallet notes:
“Many insurers offer simplified underwriting, reducing the need for a medical exam. However, those seeking higher coverage limits may be subject to a more detailed evaluation.”
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