Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries when the insured dies.

  • Life insurance is a legally binding contract.
  • For the contract to be enforceable, the life insurance application must accurately disclose the insured’s past and current health conditions and high-risk activities.
  • For a life insurance policy to remain in force, the policyholder must pay a single premium up front or pay regular premiums over time.
  • When the insured dies, the policy’s named beneficiaries will receive the policy’s face value, or death benefit.
  • Term life insurance policies expire after a certain number of years. Permanent life insurance policies remain active until the insured dies, stops paying premiums, or surrenders the policy.
  • A life insurance policy is only as good as the financial strength of the company that issues it. State guaranty funds may pay claims if the issuer can’t.