- Family protection to provide financial security to surviving family members on the death of the insured person.
- To pay for children's education.
- Insurance to cover a particular need such as paying off a mortgage or consumer debt upon the insured's death.
- Business insurance to compensate a company on the death of a key employee or to provide a surviving partner the resources to buy out the deceased partner's share of the business.
- To provide funds to pay estate taxes or other final obligations necessary to settle a deceased person's estate.
- To provide the funds necessary for the deceased person's burial expenses.
- Accumulation of funds to supplement retirement income.
What is life insurance?
Life insurance is an agreement between you (the insured) and an insurance company (the insurer). Under the terms of a life insurance contract, the insurer promises to pay a certain sum to someone (a beneficiary) when you die, in exchange for your premium payments.
Why would you need life insurance?
The most common reason for buying life insurance is to replace the income lost when you die. For example, say that you work, and your income is used to support yourself and your family. When you die, and your paychecks stop, the life insurance proceeds can be used to continue to support the family members you've left behind.
Another common use of life insurance proceeds is to pay off any debts you leave behind. For example, mortgages, car loans, medical bills, and credit card debts are often left unpaid when someone dies. These obligations must be paid from the assets left behind. This can deplete the resources that your family needs. Life insurance can be used to pay off these debts, leaving your other assets intact for your family to use.