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What is Life Insurance? What is it's purpose?

Bad things happen sometimes, and when we least expect it.

People face risks like premature death, disability or severe illness, often with serious financial consequences. Life Insurance makes it possible to cushion their financial impacts.

Policies (insurance agreements) are designed such that when the unexpected strikes, the insurance company provides financial assistance to lessen the impact of the event.

Hence, we can think of Life Insurance as a form of financial risk management.

In other words, it provides coverage against unforeseen circumstances.

Not all events are created equal.

Life insurance does not cover all events.

Typically only events of serious financial consequences will be insurable. (This rules out the common cold, unfortunately).
We discuss the different events that can be covered under insurance in Section Two.

Life Insurance also helps you to save or invest.

Other than providing cover, life policies also enable people to save or invest.

The main difference between saving & investment lies in the degree of risk involved.

Savings tend to be associated with lower risk (and potentially lower return), whereas investments tend to have higher risk (and potentially higher return).

Next... We learn about TYPES OF COVER

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