What is Life Insurance?

Life insurance is a financial contract between an individual (the policyholder) and an insurance company. In exchange for regular premium payments, the insurance company agrees to pay out a sum of money (the death benefit) to the designated beneficiaries upon the death of the insured person. This payout is intended to provide financial protection and support to the beneficiaries in the event of the insured person's death.

Life insurance policies come in various forms, including term life insurance and permanent life insurance (such as whole life or universal life insurance). Term life insurance provides coverage for a specific period, typically 10, 20, or 30 years, while permanent life insurance provides coverage for the entire lifetime of the insured person, as long as premiums are paid.

The amount of the death benefit and the cost of premiums depend on factors such as the insured person's age, health, lifestyle, and the type of policy selected. Life insurance can serve several purposes, including replacing lost income, paying off debts, covering funeral expenses, and providing financial support for dependents or beneficiaries.