Life Insurance
A contract paying a death benefit to named beneficiaries upon the insured's death in exchange for premiums.
What is Life Insurance?
Life insurance is a contract between a policyholder and an insurer in which the insurer agrees to pay a lump-sum death benefit to named beneficiaries upon the insured's death, in exchange for regular premium payments. The two primary categories are term life (pure death benefit for a set period, typically 10–30 years) and permanent life (whole or universal), which includes a cash value component alongside lifelong coverage. Term life is the simplest, most affordable option for most families seeking income replacement. The DIME method and human life value approach are common frameworks for calculating coverage needs.
Example
A 35-year-old with two children and $300,000 in mortgage debt buys a $1 million 20-year term policy for approximately $40/month. If they die within 20 years, the family receives $1 million tax-free. If they outlive the policy, no benefit is paid.
Source: NAIC — Life Insurance