What Is Life Insurance? | Why Buy Life Insurance?

 

What is life insurance? and how does it work? you see there are many unexpected things that occur in our lives. we might pass away due to an accident or we might pass away due to an illness.

 But there is one thing that we are hundred percent sure of that is we will pass away someday in our lives. 

You see insurance is a product designed to provide you a measure of protection at least financially shooter disaster happen. and life insurance is specifically designed to protect your beneficiaries financially.

 Should you pass away one day? so what exactly is life insurance and how does it work.

 Life insurance is a contract between an insurer and the policyholder. in which the insurer guarantees payment of a death benefit to the named beneficiaries upon the death of the insurer. to put it simply sum of the money call the premium to the insurance and when you pass away your beneficiaries usually your family members get a lump sum of the money call the death benefit.

 

Now the next question is should you buy life insurance? you should buy life insurance if you have anyone who may depend on you for financial support, for example, your kids or elderly parents however if there is no one that requires you to support financially and life insurance is not required.

 Let's take a look at a typical example in life insurance. we have John a fifty-year-old sole Breadwinner of a family with a wife and two lovely kids like most families John has a property on mortgage 20,000 kept aside in cash and the same amount he owes to a creditor and get $20,000 no it's one day when John passed away his Escape would have to be distributed firstly this 20,000 cash set aside might be taken away by his credit.

 Secondly, because he's the only one working in the family this property on a mortgage might be taken away as well. Just leaves his wife and kids with no shelter and no money to survive. his kids might also be in college and will be deprived of the needed funds for education. but we can all these problems be avoided.

 If and only if John had a little life insurance. now let's take a look at what happens. If John did purchase a life insurance policy John did purchase life insurance his commitment will be to set aside a portion of his income and give it as a premium to XYZ insurance company. Upon John's death, XYZ's insurance company will provide John's family a lump sum that is called the death benefit which would go to his family.

 This lump sum of money can be used to pay off his mortgage loan his family's expenses and in most jurisdictions, this sum of money is being protected from his creditors his children now also have the required money to go to college now you see why life insurance is important to everyone with a dependent.