Life insurance is a contract between the policyholder and the insurance company, in which the insurance company agrees to pay a death benefit to the named beneficiaries upon the death of the insured person. The death benefit is the amount of money that will be paid to the beneficiaries upon the death of the insured person.
There are two main types of life insurance: term life insurance and permanent life insurance.
Term life insurance provides coverage for a specific period of time, usually between 10 and 30 years. The death benefit is paid only if the insured person dies within the term of the policy. Term life insurance is generally the most affordable type of life insurance and is ideal for people who want to provide financial protection for a specific period of time, such as the years their children will be in college.
Permanent life insurance, such as whole life and universal life, provides coverage for the entire life of the insured person. These policies accumulate cash value over time and typically cost more than term life insurance.
Life insurance can also be used to provide financial security in the event of an unexpected death, to pay off debts or mortgages, to cover funeral expenses, to provide an inheritance, to fund a child’s education, or to provide financial support to a surviving spouse or partner.
Life insurance can also be customized to meet specific needs, such as providing coverage for specific illnesses or accidents, or to provide living benefits in addition to death benefits, such as providing long-term care coverage.
It is important to note that life insurance policies have exclusions, limitations and terms and conditions, therefore it’s important to read and understand the policy before purchasing it. And, consulting with an insurance agent or financial advisor can help you determine how much coverage you need and what type of policy is best for you.
