Life insurance is a type of insurance that provides financial protection to the policyholder's beneficiaries in the event of the policyholder's death. In most cases, life insurance policies are purchased by individuals who want to provide financial support to their loved ones in the event of their death. When a policyholder dies, their beneficiaries will receive a payment (also known as a death benefit) from the insurance company.
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, typically 10, 20, or 30 years. Permanent life insurance, on the other hand, provides lifelong coverage and also includes an investment component that allows the policyholder to build cash value over time.
To purchase a life insurance policy, the policyholder must first go through an application process where they will need to provide information about their age, health, and lifestyle. The insurance company will use this information to determine the policyholder's risk level and the premium that they will need to pay for their coverage.
Once the policy is in place, the policyholder will need to pay regular premiums to maintain their coverage. If the policyholder dies while the policy is in effect, the insurance company will pay the death benefit to the policyholder's beneficiaries. The beneficiaries can use the money from the death benefit to cover funeral expenses, outstanding debts, and other financial obligations.