Lífslíkurtryggingar

Lífslíkurtryggingar, commonly translated as life insurance, is a contract between an insurance policyholder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person. This death benefit is typically tax-free. The primary purpose of life insurance is to provide financial security to dependents in the event of the policyholder's premature death.

There are two main types of life insurance: term life insurance and permanent life insurance. Term life insurance provides coverage for a specified period, known as the term, and pays out only if the insured dies during that term. Permanent life insurance, on the other hand, provides coverage for the insured's entire life, as long as premiums are paid. Permanent policies also typically include a cash value component that grows over time on a tax-deferred basis and can be borrowed against or withdrawn.

The premiums for life insurance are determined by various factors, including the age, health, lifestyle, and amount of coverage desired by the insured. Insurers assess these factors to calculate the risk associated with providing coverage. Life insurance plays a crucial role in financial planning, offering peace of mind and ensuring that loved ones are not left with significant financial burdens.