What exactly is life insurance and how does it work?

Life insurance is a policy which is usually recommended by banks when you decide to purchase a house.  It is strongly recommended especially if you are entering into a joint ownership.   If either you or your partner dies then the insurance company will pay money to your friends, family or partner.  These people are known as the beneficiaries of the life insurance.  If you own a house and owe money on a mortgage then this money is usually used to pay the remaining balance on the house.  Life insurance is tax free and can still be paid out if you are dead.  The money can be used to pay for the deceased funeral or to pay off any debts which are owing, as well as paying for bills such as medical bills, car finance and other related debts.

When applying for life insurance (lifeinsurance.org) you will be asked to fill in a form concerning your family health and circumstances.  It will ask in depth questions about your health and whether you have suffered from long term illness or been diagnosed with any disease such as HIV and cancer.  If you have been diagnosed with any cancers or such like in the last five years then there is a possibility that life insurance will be refused, this is purely due to the fact that you are considered a high risk.

You will also be asked if you are a smoker or non smoker, if you are a non-smoker then you will be covered on a policy which is cheaper than if you were a smoker.  This is due to the fact that smokers put themselves at higher risk of getting diseases such as lung cancer and other smoking related illnesses.  When filling out any life insurance form you must be completely honest with your answers, as failing to inform the insurance company of your true personal circumstances initially can result in non-payment of the policy in the eventuality of your death.

The total amount which is paid out in the event of a death is variable and depends on how much you initially insured your life for.  Many people insure there lives just to cover the mortgage in the event of their death.  Others insure there partners life just in insure that expenses such as funeral costs and family expenses are covered for the foreseeable future.  There are many insurance policies out there so it is worth shopping the market for the best deal.