Life insurance is a type of insurance policy that pays a lump sum of money to designated Beneficiaries upon the death of an insured person.
The purpose of life insurance is to provide financial protection to the Surviving Family members of a deceased person.
These benefits can be used to pay for a number of expenses like a Funeral, medical expenses, outstanding Debts and Liabilities, living expenses, and other financial needs.
Life insurance works as follows: a policyholder (the deceased) pays premiums to an insurance company, and in return, the insurance company promises to give a predetermined amount of money to whom they identify, typically family members and other Heirs at the time of their death.
Life insurance policies come in a variety of forms:
Term life insurance policies provide coverage for a set period of time, such as 10 or 20 years, and pay out Death Benefits if the insured person dies during the term of the policy.
Whole life insurance policies provide coverage for the entire lifetime of the insured person and also include a cash value component that accumulates over time.
Universal life insurance policies are similar to whole life policies, but offer greater flexibility in terms of premiums and death benefits.