Life insurance is a contract between an insurance policy holder and
an insurer, where the insurer promises to pay a designated beneficiary a sum of
money (the "benefits") upon the death of the insured person.
Depending on the contract, other events such as terminal illness or critical
illness may also trigger payment. The policy holder typically pays a premium,
either regularly or as a lump sum. Other expenses (such as funeral expenses)
are also sometimes included in the premium; however, in Australia the
predominant form simply specifies a lump sum to be paid on the policy holder's
death.
The advantage for the policy owner is "peace of mind", in knowing
that the death of the insured person will not result in financial hardship for
loved ones.
Life policies are legal contracts and the terms of the contract describe the
limitations of the insured events.
