Life insurance is a type of insurance that provides a death benefit to the policyholder’s beneficiaries in the event of the policyholder’s death. The death benefit is typically paid out in a lump sum and can be used to cover expenses such as funeral costs, outstanding debts and living expenses.
Life insurance policies typically require policyholders to pay premiums, which can be either fixed or variable. These can be paid on a monthly, quarterly, or annual basis.
There are two main types of life insurance:
Term life insurance: Provides coverage for a specified period of time (typically 10, 20, or 30 years). The death benefit is paid out only if the policyholder dies within the term of the policy.
Permanent life insurance: Provides coverage for the policyholder’s entire lifetime, as long as the premiums are paid. This type of insurance includes whole life and universal life insurance. These policies also have a cash value component that builds over time, and can be borrowed against or used to pay premiums.
Life insurance can be used to protect a policyholder’s loved ones from financial hardship in the event of the policyholder’s death, and can also be used to help preserve the value of an estate or provide tax benefits.