What Is Life Insurance And How Does It Work
Life insurance is a contract between you and an insurance company.
What is life insurance and how does it work. If the policy is in force at the time of death your beneficiary receives the death benefit chosen when the policy was purchased. Essentially in exchange for your premium payments the insurance company will pay a lump sum known as a death benefit to your. Each life insurance policy is different and each state s laws regulating insurance policies are different.
In general most insurance policies identify the following. If you re still alive at the end of the term your policy ends. Many types of permanent life insurance have a cash value component that earns interest and increases in value as you pay your premiums.
In exchange the company pays a death benefit to your. As part of the agreement the policyholder pays the insurance premiums. It is a contract between an insured and the insurer.
Policies are purchased for a specific period of time commonly for 10 20 or 30 years. Life insurance can be confusing so let s start to understand it in simple words. Life insurance in simple terms.
Term life insurance is pretty straightforward. With permanent life insurance instead of paying premiums for a set number of years you pay them for your whole life and when you die your beneficiaries receive a death benefit.
