In most instances life insurance works just like any other insurance, except what you are insuring is yourself. Life insurance is an insurance policy that pays out a lump sum if you, the policy holder, die whilst you’re insured.

You pay a monthly insurance premium to be covered by a life insurance policy and the lump sum is paid out if you die during your policy term – or, in some cases, if you’re diagnosed with a terminal illness and given less than a year to live.

After your death the lump sum goes to whoever you’ve named the beneficiary, which is usually your partner, children or family members.