When It Is A Good Idea To Get Life Insurance For You And When To Avoid

By M Imran
The purpose of a life insurance policy is to protect the financial welfare of the family/loved ones of the life insured upon the life insured's death. The amount paid out will be equal to the value of the policy. This is called the face value. So, if the policy is worth £100,000 upon death £100,000 will be paid out.

Typically there are four parties involved in a life insurance policy:


The insurance provider - the company that issues the policy.
The policy holder - this is the person who purchases the policy. They make all decisions relevant to the policy. Including, naming the beneficiaries. The life insured is often also the policy holder.
The life insured - when this person dies the policy will payout.
The beneficiary - they will receive the payout upon death of the life insured. In the case of multiple beneficiaries the death benefit will be shared.
Basically, there are two main types of life insurance.


Term insurance - this lasts for between one and one hundred years.
Permanent life insurance - this lasts for the entire life of the life insured.
The cost of life insurance varies depending on factors such as the life insured's age; health; job; and the amount of insurance required. All life insurance policies fulfil the same basic role - that is to payout a death benefit. The death benefit is equal to the face value of a policy.

Furthermore, individual policies may offer special or additional features to entice the buyer. For example, consumers can purchase a life insurance policy that protects against the risk of living to an old age. Life cover can also be extended to include critical illness.

It is interesting to note that the risk incurred by the life insurance provider is very different from that of a home or car insurance provider. When a life insurance policy is issued, it is with the knowledge that the policy holder will one day die, at which time the provider will have to payout the death benefit. When a home is insured, the provider hopes that a payout will not be required and if it is, the policy premium will be increased in the next period. With life insurance the only uncertainty is when the claim will be made.

Some consumers may wonder if life insurance is a necessary expense. For those people who live long lives, the money used to pay premiums may have been better spent elsewhere. However, no-one can be certain when they will die. An accident or illness can shorten life. If a person dies young the effect on their family can be financially devastating. Remaining family members, unable to meet mortgage re-payments, may have their home repossessed. It is clear to understand why the purchase of life insurance is a requirement when taking out a mortgage.

However, it is not only mortgage consumers that need life insurance. Tenants, that are responsible for their family, will also need a financial back-up plan in place, in case of their early death. Rent and day-to-day living expenses will need to be met by the surviving family members.

To conclude, in life death is a certainty. Consumers need to take precaution if they want to ensure the welfare of their surviving family members upon their own death. Life insurance policies will always payout a death benefit. It follows that to seek a life insurance policy is an obvious and wise decision.

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