What Is Life Insurance?

Life insurance is a contract between an insurer and a policyholder. A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured policyholder dies, in exchange for the premiums paid by the policyholder during their lifetime.

KEY TAKEAWAYS

• Life insurance is a legally binding contract. For the contract to be enforceable, the life insurance application must accurately disclose the insured’s past and current health conditions and high-risk activities.

• For a life insurance policy to remain in force, the policyholder must pay a single premium up front or pay regular premiums over time. When the insured 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 funds may pay claims if the issuer can’t.

• Ready to buy life insurance? Contact now for more details