When you buy life insurance, you enter into a contract with an insurance company that promises to provide your beneficiaries with a certain amount of money upon your death. In return, you make periodic payments, called premiums. The premium amount is based on factors such as your age, gender, medical history, and the dollar amount of life insurance you purchase.
In the event of your passing, life insurance provides money directly to your beneficiaries. They can use the money for:
Making up for your lost income
Funding a child’s education
Paying off household debt
Paying for your funeral and other related expenses.
Certain types of life insurance may provide benefits for you and your family while you’re still living. For example, permanent life insurance offers a cash value component, which can be put to good use during your lifetime.