Life insurance is a contract between you (the policyholder) and an insurance company, where you pay regular premiums in exchange for a promise that the insurer will pay a lump sum, known as the death benefit, to your chosen beneficiaries if you die while the policy is active

. Here is how life insurance works in detail:

• Policyholder and Beneficiaries : The policyholder owns the policy and pays the premiums. The beneficiaries are the people or entities designated to receive the death benefit after the insured person’s death

• Premiums : These are regular payments you make to keep the policy active. The amount depends on factors like your age, health, lifestyle, the type of policy, and the coverage amount you select. Younger and healthier individuals typically pay lower premiums

• Types of Life Insurance :
  • Term Life Insurance : Provides coverage for a fixed period (e.g., 10, 20, or 30 years). It pays out only if you die during the term. Term policies can be level (fixed payout), decreasing (payout reduces over time, often aligned with mortgage balance), or increasing (payout increases with inflation)

* **Whole Life Insurance** : Provides coverage for your entire life as long as premiums are paid. It usually costs more but guarantees a payout whenever you die and may build cash value over time

* **Other Variants** : Some policies include riders or additional features, such as guaranteed insurability or terminal illness coverage

• Payout : When the insured person dies, the beneficiaries file a claim to receive the death benefit, which is typically tax-free. The payout can be used for any purpose, such as paying off debts, covering living expenses, funding education, or leaving an inheritance

• Policy Duration and Coverage Amount : You choose how long you want coverage to last and how much coverage you need based on your financial obligations, such as mortgages, dependents, and future expenses

In summary, life insurance provides financial security to your loved ones by paying a lump sum upon your death, helping them cover expenses and maintain their financial stability