What is life insurance?
Life insurance is a way to provide financial protection for your loved ones in their most vulnerable moments.
Life insurance is a way to provide financial protection for your loved ones in their most vulnerable moments. A life insurance policy ensures that if you die while your policy is active, your loved ones will receive a lump-sum payout, known as a death benefit. The death benefit can be used to cover things like mortgage or rent payments, education costs, funeral arrangements, and more.
In its simplest state, every life insurance policy is made up of these four components:
Insured - The person whose life is covered under the policy. Typically, this is the person who owns the policy and pays the premiums, however, it is possible for the policy owner and payor to be someone other than the insured.
Beneficiary - The person(s), entity, or institution(s) that receive the death benefit if the insured person dies. You can name one person (or more) as beneficiaries when you purchase a policy.
Premium - The money paid to keep a policy active. Payment ensures that the insurance company will provide your beneficiaries with the stated death benefit in the event of your passing. If you stop paying premiums, the policy lapses.
Death benefit - The money paid out if the insured person passes away. Death benefits are generally not subject to an income tax and beneficiaries usually receive the benefit in one lump-sum payment