Insurance is one of the components of a personal finance strategy. Life insurance provides customers with protection from financial losses in the event of their death. As with other forms of insurance, life insurance is not mandatory.

Features

In exchange for successful, on-time payment of life insurance premiums, the insurance company will award a specific sum of money to a predetermined beneficiary when you die.

Term Life Insurance

Term life insurance provides a death benefit for a predetermined period of time--usually between one and 30 years. If you die during the coverage period, the beneficiary receives the benefit; there are no benefit provisions for those who live past the policy term period.

Whole Life Insurance

Whole life, or permanent, insurance provides a death benefit regardless of when you die. Premiums under this type of life insurance continuously increase. After a certain point, these premiums become available as a cash value if the holder chooses to discontinue the policy, meaning that the holder can borrow against or cash in these savings.

Function

Life insurance is important for those who care for financial dependents or provide cooking, cleaning or child-care assistance for their family. Life insurance can also protect an elderly person's retirement savings from unforeseen medical expenses after a spouse's death.

Sources

You can buy an individual policy, which is not part of a group plan, from an insurance agent or broker or from a savings bank. You can also obtain an individual policy directly from an insurance company or a fee-only financial adviser, who will not earn a sales commission on the policy. Group policies are often available from employers. Your credit card companies and lenders may offer you life insurance to ensure that sufficient funds are available for repaying outstanding debt after you die.

Source:

Yahoo Finance: Buying Life Insurance

Insurance Information Institute: What Are the Principal Types of Life Insurance?

Insurance Information Institute: How is Life Insurance Sold?

Resource:

CNNMoney.com: Top 10 things to know about life insurance