In exchange for a series of premiums payments or a single premium payment, upon the death of the insured person, the face value of the life insurance policy, minus any outstanding policy loans and interest, is paid to the beneficiary.
In addition, living benefits may be available for the insured person in the form of surrender values or income payments.
The owner of the life insurance policy buys a certain amount of life insurance on the insured person (himself/herself, or someone else), and agrees to make the premium payments on time.
In return for the premium payments, the insurance company agrees to pay the death benefit of the life insurance policy upon the death of the insured person.
Individuals receiving the death benefit usually get the money free from federal income taxes.
Many people choose to buy life insurance to provide financial security for their family in case they die. The death benefit from a life insurance policy may be used by the beneficiary for any reason. many people choose to buy life insurance to replace the income of the main bread-winner of a family, to pay off their home mortgage, pay off credit cards, provide for their spouse's retirement, pay for living expenses, their child's education, etc.
Learn more about how life insurance works and how you can compare life insurance rates and plans online.