What is 'Life Insurance'
Life insurance is a contract between an insurer and a
policyholder in which the insurer guarantees payment of a death benefit
to named beneficiaries upon the death of the insured. The insurance
company promises a death benefit in consideration of the payment of
premium by the insured.
BREAKING DOWN 'Life Insurance'
The purpose of life insurance is to provide financial
protection to surviving dependents after the death of an insured. It is
essential for applicants to analyze their financial situation and
determine the standard of living needed for their surviving dependents
before purchasing a life insurance policy. Life insurance agents or
brokers are instrumental in assessing needs and establishing the type of
life insurance most suitable to address those needs. Several life
insurance channels are available including whole life,
term life,
universal life, and
variable universal life (VUL) policies.
It is prudent to re-evaluate life insurance needs annually, or
after significant life events like marriage, divorce, the birth or
adoption of a child, and major purchases, like a house.
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