What is Life Insurance?

Life insurance is a contract in which the insurer pays a lump-sum death benefit to designated beneficiaries on the death of the insured, in exchange for a periodic premium during the policy term.

Two main families exist: term life (pure protection for a fixed period — 10/20/30 years — cheap and simple) and permanent life (whole, universal, variable — protection plus cash-value investment, expensive and complex). For most households, term is enough; the cash-value component is rarely the best investment vehicle.

Coverage should equal 10–15× annual income for a primary earner with dependents, scaled down as savings grow and dependents become independent. Single individuals without dependents usually need little or none.

Example

A 35-year-old non-smoker buys CHF 1m of 20-year term life insurance for about CHF 35/month — enough to cover the mortgage and children's expenses if they die early.

Related terms

Term Life Insurance

Term life insurance is the simplest form of life insurance: it pays a fixed death benefit if the insured dies within a defined term (typically 10, 20 or 30 years), with no cash-value or savings component.

Disability Insurance

Disability insurance replaces a portion of the insured's income — typically 50–70% — if illness or injury prevents them from working, providing financial security during inability to earn.

Health Insurance

Health insurance is a contract that pays for medical care — hospital, outpatient, prescription drugs — in exchange for a monthly premium plus cost-sharing through deductibles, copays and coinsurance.

Retirement Planning

Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve them — covering savings, investments, insurance, taxes and withdrawal strategy.

Frequently asked questions

Term or whole life?+

Term for nearly everyone; whole life only for specific estate-planning needs and very high net worth.

How much coverage do I need?+

10–15× annual income, minus existing savings and other death benefits.

Do I need it as a single person?+

Only if someone depends on your income or you have significant debt that would burden survivors.