Life insurance has many roles and can bought for a variety of reasons. Traditionally policies provide payouts to the families of the deceased. Individuals have great choice in deciding the sum they wish to be insured for and the frequency of the payments should they be needed. Some policies allow monies to be paid as an income and in others payouts are received as a lump sum.

Other policies are more like investments and can help an individual to save. Additional options can be included in policies such as accidental death cover, critical illness cover and fatal accident insurance. Protection for businesses can also be included in specific polices.

Term insurance is often bought by individuals who want a simple policy to protect their families and dependents from financial distress should the insured die. A lump sum is received by the dependents if death occurs during the period of the contract with the insurance company. If the insured outlives the policy then no payment is received. Term Insurance is usually bought to continue outstanding mortgage repayments that the family might struggle to pay. The insured chooses the amount they wish to receive and the length of cover. This can vary from months to decades and often a calculation based on the size of the mortgage and how long their children may be dependent for.

There is substantial flexibility concerning term insurance and the individual can find a policy that suits them. There are various kinds of term insurance which effect the amount paid and can include the option to move to another kind of policy.

In a ‘level term' policy the insured pays their premium at the same levels and their dependents receives a set amount following their death. If the insured outlives the policy no monies are paid.

If an individual wishes to purchase another term insurance after a specific passage of time they can do so with a ‘renewable term' policy. There is no request from the insurance company for additional medical information that could affect the policy as long as coverage does not extend past a certain age.

The insured can also choose to move to an investment-type policy. In this instance a ‘convertible term' insurance would have been bought. Further medical information is not required although the age of the insured would be considered and this could affect the policy. Those interested in this policy must renew before the end of their present policy. They should be aware that the final payout on the new term would be equivalent to that of the previous one.

Final payouts can be increased with inflation if the insured takes out an ‘increasing term insurance'. Premiums also rise to account for this increase.

If the insured wishes to take out a repayment mortgage or pay outstanding balances on loans a ‘decreasing term' insurance may apply. The premium remains the same throughout the terms of the policy although the end payout falls annually until it reaches zero. This type is often cheaper than level term insurance.

Families can receive their insurance payout as an income if an individual obtains ‘family income benefit'. The frequency of payments would be decided by the insured as would the length of the policy. A common length of time is the estimation of how long children may be dependent on the remaining adult.

Some policies guarantee a final payout whenever the insured dies. These are called ‘whole-of-life insurance' and are usually more expensive than term insurance because there are no time restraints on the policy. An individual may stop paying the premium at a specified age but will still be covered by the insurance upon their death.

Individuals can also use their life insurance policies like an investment by purchasing endowment insurance. This can be a ‘with-profits' or ‘unit-linked' approach. With-profits entails investment in the stock market by the insurance company. The policy would reflect the investment growth which is returned via a bonus system. The unit-linked approach gives the individual more control because they choose the business that the insurance company invests in. This has an element of risk because the amount received from the policy is a reflection of the worth of the investments.

Optional extras within life insurance policies can help protect business interests. Key business insurance can be bought for individuals who are imperative to a company and payouts can aid teaching new staff their role. Partnerships can benefit if an individual dies: remaining partners can use the policy to purchase the rest of the business. Director's share protection ensures payouts for directors in a company who may wish to buy out their deceased colleagues business share.

The insured can also buy critical illness cover which would payout a lump sum if they suffered a specified medical condition. Individuals can also choose to be covered by accidental death protection –which pays out only when an accident has occurred - and fatal accident benefit which pays an additional amount in conjunction with the sum insured.

For individuals concerned about paying inheritance tax their insurance can be excluded from their estate and not be liable for taxation. Additionally some policies are not liable for income tax if they are “qualifying”.