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Life Insurance - What Is It and Why Do You Need It?

The high and low of life insurance, also called life assurance, is a contract that is in effect between yourself and whomever the insurer is. This contract's purpose is to provide to whoever you state is the beneficiary with money that is paid out upon your demise. During the time that you are alive and well, you will, during the life of the contract, pay a set amount for premiums which are usually paid monthly or every three months - however you have set up the contract agreement.

Now, almost every insurance policy will have stipulations as to what will be paid out on what is called an insured event and is as such is applied to everyone that is named inside that policy. An insured event is normally either a natural death or an accidental death. As with any insurance policy, there are conditions that if met, will not be covered by the insurance policy, but can be added as riders and cover such things as: long term care needs, diagnosis of terminal illnesses or critical illness, health related disability, or permanent disability.

There are some exclusions that are written into almost every life insurance policy that will limit the pay out on a death which include such things as suicide, fraud, war, riots and civil war.

There are also two forms of life insurance available, permanent (whole) and temporary (term). Term life insurance is a policy that covers the person (insured) during a specified period of time where, as it is considered "pure" insurance, only buys protection in the event of a death and nothing more. As this type of insurance is normally in effect during the period of time in the contract and it is generally accepted by both parties that death during the time is highly unlikely to occur, the premiums are much lower than permanent or whole life. On the other side of life insurance is permanent or whole that provides a person with a level premium and a cash value table that will calculate the payout of various factors upon death.