Life insurance is different from other forms of insurance with respect to the fact that it covers a situation in which the question is when and not whether or not it will happen. Everyone is bound to die at some point in time and all forms of life insurance including those that pay benefit upon the death of the policyholder and those that provide income to the policyholder at an agreed-upon age or time serve their purposes. The right life insurance package would largely depend on the economic needs of the dependents that are expected to be left behind.

Insurance is a contract with requirements on both the side of the provider and the person being covered. Essentially, the insurance company promises to pay a specific amount when the person covered dies during a specific period. The coverage vanishes when the policy reaches its deadline. The insurance company can charge a different rate in accordance with provisions of the state insurance commission after the secured period ends, should renewal be an option. Changing health status during the term limits does not affect premiums or pay-off but will definitely matter when a new policy is bought.

A person thinking of purchasing a life insurance policy needs to consider the financial situation and standard of living that he/she wants to maintain for his/her dependents or survivors. It may be necessary to assume immediate death to determine the current life insurance needs. This would include the dependency period income for children, income for the surviving spouse, mortgage and other debt payoffs, college education funds and an additional emergency fund.

Life insurance policies are generally categorized into two main types. One provides only death protection and the other offers or requires cash value accounts in which a return-on-investment component forms part of the policy. Any life insurance program should be periodically evaluated since life insurance needs change over time. Particular attention should be given to the financial stability ratings of the life insurance company because life insurance is a long-term proposition.

Term Life Insurance provides death protection without any savings, investment or cash value that ends on the expiration of the coverage period. Cash value life insurance such as whole life, universal life and variable life expands the purpose of a life insurance policy into that of a long-term savings account or a stock market investment. However, these types of life insurance have much higher premiums because of the additional benefits. Life insurance policies can also be individual or group.

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