Life insurance is a contract between two bodies. Here the first person is who borrows the life insurance policy which is also called policy owner and the second person is called the insurer. Generally the second person who is called an insurer is a company. Here the policy owner has to pay certain amount of money at every fixed interval of time generally once in a year. In return the insurer company promises the policy owner to give a huge amount of sum, which is fixed at the time of contract signing, at the time of death of policy owner or serious illness of policy owner. In some countries the funeral expenses are also paid by the life insurance company and it is part of contract. Generally life insurance is a surety of money paid to the family of policy owner. It is essential for the earning member of the family to have a life insurance policy. It is important and beneficial both because if the earning member of the family dies in any accident then the family can do something else with the policy money to live their life.

In life insurance policy the person who gets the money after the death of the policy owner is called beneficiary. In most cases this beneficiary should be the family member of the policy owner. But it is not necessary that the life insurance policy always gives the benefits after the death only. In some cases this life insurance policy gives benefits at other time also such as at the time of serious illness, as an investment policy, or a protection policy.

There are some other events also where these policies play an important role such as:

1. Death benefit.

2. To pay off the mortgage in the event of death.

3. Sometimes to pay possible Estate Taxes.

4. It is also beneficial in providing liquidity when many assets are tied into Real Estate.

In this there can be a difference also between the insured and policy owner. In most cases the insured and policy owner are the same person. But in some cases they can be different. For example, suppose if you buy a policy for you own lives then you are insured and the policy owner both. But if your wife buys the policy for your life then you are the insured and your wife is the policy owner. The premiums are paid by the policy owner only not by the insured person. The insured is just a participant in the contract if the policy holder or insured are different person.

There are some circumstances when the policy becomes null such as if the insured person commits suicide then this policy is cancelled and the beneficiary did not get any money. The other reason for the nullification of the application can be any misrepresentations by the insured person.

Life insurance is a very important part of life. It costs you but it is lifesaver policy for your family after your death. It assures your family that even after your death your family is going to lead a good life.