How does Life Insurance work?
Why do people take out life insurance? What are they actually insuring themselves against? When does it pay out? Different companies offer different life insurance policies, but the basics of life insurance remain the same.
Basically, the policy holder agrees to pay a certain amount every month - and the insurer agrees to pay their next of kin a certain amount if the policy holder dies while the life insurance policy is active.
However, the insurer won`t pay out if (for example):
- those monthly payments aren`t being made regularly,
- the insurance policy has expired,
- the policy holder didn`t tell them all the facts (e.g. they`re a smoker) when they took out the policy,
- the policy holder`s lifestyle has changed significantly and they haven`t informed the insurer, or
- the policy holder dies in a way (e.g. suicide) that isn`t covered by the policy.
The actual cost of the monthly payment will vary from one person to the next. It can vary a great deal, as it depends on (for example):
- their age,
- their gender,
- their lifestyle,
- their occupation,
- their family medical history, and
- how much they`ve insured themselves for.
A life insurance policy can`t protect the policy holder`s loved ones from the emotional consequences of their death, but it can make a huge difference financially - especially if the policy holder is their main breadwinner.
Useful Pages:
Insurance