What is life insurance, and who needs it?

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What is life insurance, and who needs it?
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• Life insurance is a
  contract between an individual (policy owner) and
  an insurance company (insurer). The policy owner
  agrees to pay a periodic premium or lump sum in
  exchange for the insurers promise to pay a
  particular sum of money (death benefit) to
  certain individuals (beneficiaries) upon the
  death of a specified person for whom the policy
  is purchased. The person covered by the life
  insurance policy (insured) may or may not be the
  policy owner. But, for purposes of this book, we
  will assume the policy owner and insured are the
  same.

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• Who needs life insurance?
• Life insurance is generally needed
  any time there is a situation where an income
  earner is responsible for the financial needs of
  another. If you or your spouse provides a
  significant portion of the familys income, you
  will need some sort of life insurance for your
  family to maintain their standard of living. If
  this individual passes away, life insurance can
  replace his or her income, pay to raise children,
  and cover their college education.
• If you do not have any dependents,
  or are not significantly contributing to your
  familys household income, you likely do not need
  life insurance however, you may wish to buy a
  life insurance policy to cover the cost of your
  funeral services as well as leave an inheritance
  to family members.

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• There are two main types of life insurance that
  well address in this guide term life insurance
  and permanent, or whole, life insurance.
  Everything else is a variation of these two
  types. The type of insurance you need may depend
  on a variety of factors, including your financial
  situation and your lifestyle.
• Term insurance provides coverage for a specific
  period of time, typically from one to 30 years.
  The death benefit is only paid out if you pass
  away within the term of the policy. If the term
  ends before you die, you receive no return on the
  money that you paid for the insurance.
• Permanent life insurance provides coverage for
  your entire life as long as you continue to pay
  your premiums. Along with providing for death
  benefits, permanent life insurance also has a
  cash value component. You have the option of
  cancelling your policy and cashing out the policy
  and the premiums that you have paid into the
  policy at any time. Alternatively, if you
  continue to pay the premiums, you can opt to
  redeem or borrow part of the cash value, yet keep
  the policy in effect. Permanent life insurance
  generally has higher premiums than term
  insurance.

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• You should consider purchasing life insurance if
  you fall into one of the following categories
• Parent -Parents are generally financially
  responsible for their children. In the case one
  or both parents pass away, the death benefit can
  help to cover housing, living, childcare, and
  educational expenses of dependent children.
• Couple - Even if they do not have children,
  couples typically need coverage. For example, the
  primary earning partner needs insurance to ensure
  the financial well-being of the other partner in
  the case of death. Both partners may need
  insurance if they have significant outstanding
  loans and debts and to avoid depletion of the
  couples savings if one partner dies.
• Single adult - Coverage is essential if an adult
  is either a single parent or the primary
  supporter of another individual such as an
  elderly parent.
• Child - Children may need life insurance. The
  death benefit will pay for medical and burial
  costs.
• Do my children need life insurance?
• Securing a life insurance policy for your
  children may seem like a morbid proposition, but
  in actuality it can be a rather smart investment.
  No one wants to think about their children
  passing away, but on the rare occurrence that
  this does happen, you do not want to face
  financial ruin.

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