Life insurance acts as security to provide funds at death for funeral and burial expenses, offer an income to the beneficiaries, provide a means for tax-efficient savings as well as leave a legacy for dependents. Life insurance is either offered by the employer or can be purchased separately. It assists to mitigate the financial burden of one’s dependents in the event of their death, pay one’s estate taxes, and replace the insured’s income with non-taxable death benefit (Cummins, 2002). Further, life insurance is divided into term life, whole life, and universal life insurance.
Steuer (2011) states that the importance of life insurance is the provision of a substantial lump-sum as a replacement for lost income in the event the insured dies. Moreover, it provides the desired death benefits at a lower current cost, in this case term life. Further, life insurance protects the lifestyle of one’s spouse in case they have died. It also covers a mortgage or other loan as well as providing the insured’s beneficiaries with liquidity to cater for final taxes, business taxes, settlement costs, and capital gains. Life insurance also acts as a source of financing sabbaticals, retirement or a business opportunity.
Although life insurance is laden with benefits, many Christians opt to go without it since they see that as a lack of faith in God and love for money. However, the Holy Bible advises Christians to prepare for the future and one way of doing that is by taking an insurance cover. It further instructs people to provide for their dependents, particularly those in one’s own house (1 Timothy 5:8, KJV).
Technologies and capabilities have helped shape life insurance in terms of risk management. This has made it easier for data collection and storage as well as modelling, analysis, monitoring, control and communication of risk (Cummins, 2002).