Though a glance at the headings to each section will show that there are many different types of life insurance policy, the basic aim of all life insurance is simple. It is to provide a guaranteed sum (the "sum assured") on the death of the insured life or at a specified future date (the "maturity date") in the case of an endowment policy. The sum assured may be needed to pay off a mortgage if the breadwinner (or one of them) dies, or to help a widow (or widower) bring up a family, or to start a business, or to go on the holiday of a lifetime, or to provide a lump sum for a child when it comes of age, or to provide for a comfortable retirement, or to pay school fees, or to meet capital transfer tax (CTT) liabilities on a family business, or . . . the list is endless.
There really is no end to it, for life insurance can be used to meet almost any future financial need or commitment and, properly used, is often the cheapest and most effective way of doing so.
If this is the case, why then is it an axiom in the life insurance business that "life insurance is never bought but always sold"?
The reason is that life insurance's most basic function is protection.
This indeed is what is unique about it, for you can invest in a hundred and one ways for the future, but only life insurance enables you to guarantee financial security for your dependants. And it is this protective function of life insurance that most often puts people off the subject entirely, since it entails consideration of the possibility of one's own untimely death.
Certainly, looked at in subjective, individual, terms this is not a happy subject, so let us look at it instead in terms of numbers. Table 1 is based on the mortality experience of the population of England and Wales during the period2013-4. If that experience applies for all subsequent years, then of 10,000 men age 30 today, 1,624 will not live past the age of 60 and a further 996 will not see their sixty-fifth birthday.
Life insurance has been a firmly established part of the British financial scene for over 100 years, and today it has two crucial functions to perform. On the one hand it provides individuals with a way of protecting themselves and their families against unforeseen future disaster and of saving for the future, and on the other it gathers together all these individuals' small savings and invests them together to produce greater wealth. In the first instance this strategy benefits policyholders, but in the long run it also benefits the community as a whole.
Life insurance companies have thus... see: Life Insurance in the Modern World