Understanding how life insurance works is critical to know if it is the right choice for your needs. This is a legal contract you secure with a life insurance company. You choose the term or length of time you want to have this protection. The life insurance company agrees to pay out a specific amount of money, called a death benefit if you die while the life insurance policy is in place.
If you die during the time the life insurance contract is in place, the death benefit is paid to the person you name on the policy, called the beneficiary. They can use these funds for any needs they have from paying to continue their lifestyle to other needs.
A life insurance policy can be purchased for a set number of years, called the term. This can range from 10 to 30 years. You can also choose a whole life insurance policy. That type remains in place throughout your lifetime.
Throughout the period that the policy is active, you make payments on it. These payments are called premiums. The cost is related to various factors, including your age, the amount of coverage you purchase, your health, and other factors. The younger you purchase the policy and the healthier you are at the time of doing so, the more affordable life insurance can be.