Function

• Life insurance policies are structured to pay a predetermined sum of money to an insured person's beneficiary in the event of the policyholder's death. One of the main intentions behind life insurance is the replacement of the income that would be lost by a primary breadwinner in the family. Life insurance proceeds are typically used by families to allow them to continue living in the style to which they have become accustomed. Other, more advanced, uses of life insurance exist that make it a very attractive purchase for people in a position to take advantage of such additional benefits. These additional benefits are often feasible when the policy is purchased to insure a minor child.
  
  

Significance

• Life insurance is one of the most important types of insurance a person can own if they have family members who rely on their ability to earn an income. In the event of a tragedy, a family's mourning is stressful enough. If no life insurance policy existed to replace the lost income, additional problems would result that make the grieving process even harder to handle.
  In more advanced situations, permanent life insurance can be purchased on a minor child and many of the benefits of the cash value manipulation can be used advantageously. Although significantly less common, life insurance policies can be purchased in the name of a young child with the full intention of ignoring the death benefit and focusing on the guaranteed growth of the cash value.
  
  

Types

• Any adult can purchase any of the available types of life insurance. It is only when a minor child is to be insured that certain restrictions often exist. Most life insurance companies will not insure a minor with a term life insurance policy. Children are usually restricted to one of the types of permanent life insurance--whole life, universal life or variable life. The permanent life insurance policies all operate in a similar fashion on the surface, with the main differences being the methods in which the cash value account is managed and credited with any appropriate growth or interest earnings.
  
  

Potential

• The purchase of life insurance gives families the potential to continue their existing way of life if one of the main financial contributors to their household suddenly dies. Additionally, the potential exists for significant advantages when proper planning and discipline are present and a policy is purchased on the life of a minor child. The financial potential that exists within a policy purchased on a newborn can be much greater than that which could be achieved through traditional and conventional means of saving and investing.
  
  

Benefits

• The main advantage of acquiring life insurance is the protection of one's family's financial stability in the event of an unforeseen tragedy. Proceeds can be used to continue a lifestyle that would otherwise have to be abandoned upon the death of a major breadwinner in the household. Other advantages exist when life insurance policies are purchased with the intention of maximizing the tax benefits and utilizing the cash value accumulation.