What is Life Insurance?

Life insurance is a form of insurance that pays monetary proceeds upon the death of the insured covered in the policy. Essentially, a life insurance police is a contract between the named insured and the insurance company wherein the insurance company agrees to pay an agreed upon sum of money to the insured's named  so long as the insured's premiums are currentPeople take out life insurance policies for a number of reasons. Such insurance provides security to family members upon the loss of a loved one. For instance, if the primary wage earner dies in his or her prime, the death benefit received from a life insurance policy will assist the surviving family members in overcoming the burden of the tragic loss. Life insurance can be purchased by individuals, but is also offered as a perk by many employers. Often times, large employers and government employers offer  at no cost to the employee. Should the employee wish to obtain additional life insurance from the employer's insurance company, they can usually do so at reduced rates. The cost of life insurance varies depending on such factors as the insured's age, health, and occupation. For example, the premium for a 25-year-old, male, non-smoker in excellent health will be far less expensive than a similar policy for a 65-year-old male smoker. Similarly, a sky dive instructor would have to pay much higher premiums for life insurance than would a librarian. Life insurance is available in a number of different forms to fit the tastes of the proposed insured. Some of the typical forms of life insurance policies include: whole life, varaible life, and term life. life insurance policies begin with low premiums during the initial stages of the policy and these premiums increase steadily as the insured grows older. There is no cash build-up in a term policy and, accordingly, the death benefit will not increase. With whole life and variable life insurance, a portion of each premium pays for the insurance and the remainder serves as a tax-free investment. A whole life policy sets a premium at the beginning of the policy and that premium does not change over the life of the policy. This form of insurance allows for a cash build-up during the insured's life. This cash build-up can be used during the course of the policy or it will simply serve to increase the death benefit in the end.