Also known as term insurance or death insurance, life insurance is a lump sum benefit that is agreed upon at the time of applying for the insurance and is paid to the policy owner after the death of the life insured. Put simply, if there is a death there is a payout. This insurance also pays out when there is a terminal illness diagnosed.
The main purpose of life insurance is to maintain the same financial position for the beneficaries had the event never occured. For example, if a father was the only income generator of his household , he and his wife had a mortgage on their house and they had two kids, it would be important to have enough life insurance cover on the father to replace the income that was lost as a result of his death. Often financial advisers will give advice to have the life insurance pay out the mortgage and leave enough of a lump some to provide a reasonable income stream from the interest of the lump sum without eating into the capital of the lump sum.