subject: What Is Life Insurance? – What is Life Insurance? [print this page] What Is Life Insurance? What is Life Insurance?
What is life insurance? There are legal definitions and practical definitions. The basic legal definition states that life insurance is a contract between an insured person and an insurance company that on the event of the insured person's death the company will pay a certain sum of money to the named person's beneficiary. In practical terms, the insurance company will pay the beneficiary the amount of the policy when the insured person dies. But, life insurance can mean much more than money to families and businesses. It can mean ongoing stability in the wake of an unexpected death.
Many families start considering life insurance when they start having children. And that is the responsible thing to do. Families usually have one or two wage earners. If the primary wage earner dies, the family has no income. If one of two dies, the family loses half of its income. If a stay-at-home parent dies, the primary wage earner has to step in and take over the at-home responsibilities. All of this requires monetary support. That is exactly what it does for young families. It provides the monetary support to keep the family living at the same level as before the unexpected loss.
Even older people consider getting life insurance as their children grow and start families of their own. Life insurance is a way to make sure the named persons can leave something to their children and grandchildren. The life insurance can take care of any outstanding debts and leave the bulk of the estate for division, as the deceased would want. Debts come before anything when it comes to settling an estate. That is an unfortunate fact of life. And unexpected medical bills and final expenses can drain an estate quickly. It is ways to make sure you can pass something along in the end to the people you love you most.
Another reason life insurance exists is to provide protection for small family owned businesses. Many families depend on the income from the business. And if there are employees involved, they depend on the jobs being there as well. A life insurance policy is essential for the owners of a small business. The funds will allow the business to continue in the wake of an unexpected loss. It is protection for the business and its employees. You see that life insurance is a necessary part of proper planning for businesses and families.
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