Life insurance is a contract that you buy which pays out the amount that you have selected in the event that you die or are deemed terminally ill. The contract is called a policy. The cost that you pay for the policy is small compared to the amount that you select to be insured for as the risk is spread across the other policy holders and the reinsurers.
The purpose of taking life insurance is to transfer the financial consequences of you death or terminal illness to the insurance company. A significant portion of life policies do pay out prior to death under the terminal illness clause. The terminal illness clause is a part of the policy that says if you are diagnosed terminally ill and are going to die within 12 months then the amount that you have insured yourself for will be paid prior to death. It is a way to improve your life and tidy up your affairs in your final months.
Your need for life insurance will depend on your circumstances and will vary through your life. The amount you select to be insured for will depend on what you would want to have happen for those who depend on you and your ability to create income. It is about taking care of yourself and those you love.
