What Is Life Insurance? Life insurance is a contract between a life insurance company and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to one or more named beneficiaries when the insured person dies in exchange for premiums paid by the policyholder during their lifetime. KEY TAKEAWAYS Life insurance is a legally binding contract that pays a death benefit to the policy owner when the insured person dies. For a life insurance policy to remain in force, the policyholder must pay a single premium upfront or pay regular premiums over time. When the insured person dies, the policy’s named beneficiaries will receive the policy’s face value, or death benefit. Term life insurance policies expire after a certain number of years. Permanent life insurance policies remain active until the insured dies, stops paying premiums, or surrenders the policy. A life insurance policy is only as good as the financial strength of the company that issues it. State guaranty ...
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