Life insurance is the only cradle to grave financial instrument. It is for pure protection, an additional savings vehicle, an emergency fund, a college planning tool, a supplemental retirement income stream or all of the above.
As pure protection, life insurance obviously first provides a cash payment to those we leave behind. Most policies these days have options that allow the insured to use the part of the face (benefit) amount for use while still living. This is useful when paying out-of-pocket for medical treatments, long-term care or hospice care.
Beneficiaries (the recipients of the policy proceeds), have the option of taking a full cash payment or as an annuity, which is a stream of payments. Each beneficiary chooses the option that is best for their needs.
Some pure protection policies are low face amount policies, usually under $30,000, that are meant for end of life expenses only. These are the costs of funerals, estate transitions and final medical bills.
Insurance payments, called premiums, are based on the face (benefit) amount, the term (length of coverage), age, gender, tobacco use and health of the insured. Other factors that can affect the premium are lifestyle issues such as avocations like auto racing, scuba diving, rock climbing etc. Certain occupations may also impact the premiums.
Life Insurance policies can be purchased at any time up until age 85 depending on the policy. Also, depending on the policy, the policies stay in force until age 120.