Life insurance is protection against financial loss in the event of the death of the insured person. Usually life insurance is taken out so that the bereaved family will have some money, perhaps when the main bread winner dies. However, it is possible to take out life insurance on a 3rd party if you can prove that you would suffer financially if that person died. For example, 2006 has been Queen Elizabeth IIs 80th birthday. Any company who produced items to celebrate that event, such as commemorative plates or silverware, would have suffered financially if the Queen had died before reaching 80 years.

There are different types of life insurance - whole of life policies, term insurance and endowment policies. Now both whole of life and endowment policies are actually life assurance rather than life insurance. The difference is that insurance covers you for something that might happen while assurance covers you for something that will, assuredly, happen.

Term insurance covers you if you die during the policy term, which could be 6 months, 10 years or even 35 years. This kind of policy will pay nothing if you are still alive at the end of the term. Consequently the premiums are significantly lower than in the case of life assurance policies.

Whole of life policies pay out on your death. The premiums are payable up until you die and then a previously determined sum is payable to your beneficiaries.

Endowment policies are for a fixed term, usually 10 years or more. The premiums are payable throughout the term and are invested. At the end of the term the policy matures and the proceeds are payable to the policy holder. In the event that the policyholder dies before the end of the term then a guaranteed death benefit is paid out to the beneficiaries.

There are also reducing term insurance policies which are often used to ensure a mortgage is paid off in the event of death. In these life policies the premiums are constant over a fixed term but the sum assured payable on death reduces over the term. The initial premium is less than for a fixed term insurance policy because of the reducing amount. In the case of mortgage protection the amount owing should also reduce over the term so the life policy would always be sufficient to repay the mortgage.

To determine which life insurance is right for you and your situation you are advised to speak to a specialist life insurance broker.