Life Insurance or owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the policy owner's death. In return, the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at regular intervals. As with most insurance polices, life insurance is a contract between the insurer and the policy owner (policyholder) whereby a benefit is paid to the designated Beneficiary (or Beneficiaries) if an insured event occurs which is covered by the policy. To be a life policy the insured event must be based upon life (or lives) of the people named in the policy.

Life insurance is unique among financial instruments. It is one of, if not the only financial instrument that is based on caring and love.

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We buy life insurance because we want to make sure that our loved ones, especially our dependents, can remain financially secure after we die. The money your beneficiaries receive - the death benefit - is income tax free and can help pay for your funeral costs, final estate settlement costs or medical bills.

The reasons on which it is necessary to issue life insurance:

Mortgage repayments – do you wish to arrange for your mortgage to be paid off?

Replacing the primary earner’s salary – ensuring the family does not fall on hard times after your death.

Replacing childcare – the death of the primary childcare provider could lead to the need for childcare expenses.

Education expenses – cover for school/university fees after the death of the primary earner.

Life insurance is also used to achieve specific business or estate planning goals.

ICI recommends that each family income provider carry no less than ten times their annual income in life insurance. The amount of your outstanding mortgage should also be a consideration. Any coverage for your mortgage should be in addition to the amount of insurance you calculate for your income coverage.

Buying life insurance is a little more complex than purchasing so, when you purchase a policy you are buying a promise, a contract to pay something in the future vs. buying a commodity or something tangible. It's very important for you to examine the company that's backing your policy as well as considering the cost of the policy. You should pay particular attention, at time of purchase and throughout the life of the policy, to the financial stability ratings of your life insurance company.

You should have enough coverage to replace the income that you would have earned had you been alive to earn it.

The longer your policy remains in force, the more likely it is that the company will pay a claim, therefore the more expensive it is. That is why whole life insurance policies have the highest premium - it's insurance for your whole life, no matter when you pass on. When you have a whole life policy you have assurance that you will have coverage as long as you live. As long as you pay your premium, the company will guarantee that benefits will be paid to your heirs. That is why a 5 or 10-year term life insurance policy is the least expensive. The company is less likely to pay a claim on that term life policy.

There are ways to save money when buying life insurance, but they don’t always entail paying a lower premium immediately. As your top priority, look for a policy that meets your needs. Buying the wrong benefits for a low premium is a waste, not a saving. Beyond that, here are some ways to maximize your life insurance dollars.