What is life insurance?

About life insurance

Life insurance provides individuals with the security of knowing that dependents and others will receive benefits upon the insured’s death.

Benefits come in the form of financial compensation – primarily to help replace income and pay for funeral expenses. Different life events, such as marriage, divorce, or the arrival of children, will trigger different needs for life insurance protection.

There are two primary types of life insurance coverage options: term life insurance and whole, or permanent, life insurance. Term insurance pays death benefits only if the insured dies during the term of the policy and it simply expires at the end of the term, although it can be renewed. Whole, or permanent, life insurance pays death benefits whenever the insured dies, and does not expire.

Death benefits are the money paid out by the insurance company to the insured’s beneficiaries, dependents, or estate. Beneficiaries are individuals or entities the insured specifically names to receive the death benefits from the insurance policy.

Life insurance can be purchased as individual policies, through an agent or directly through the insurance company; or as a group policy, through an employer, trade association, or other group like an alumni association.

Some types of life insurance, or coverage options, require a medical exam and proof of insurability in order to provide coverage.