Life insurance policies are designed to protect the beneficiaries of the policy against the loss of income that would result if the insured person passed away. In return for monthly premiums, the life insurance company administering the policy pays out a tax-free lump sum to the beneficiaries of the policy in the event of the death of the insured person.
A life cover pay-out is intended to replace the income provided by the deceased and can be put towards food, bond repayments, medical expenses and school fees.
You should update your policy regularly to ensure that you have sufficient cover. Marriage or the birth of a child, for example, could mean that you need more cover.