What does life insurance do?
A life insurance policy is a contract. In exchange for required premiums, the insurer pays a death benefit when the insured person dies while covered, subject to the policy terms. The beneficiary generally chooses how to use the money, such as for household bills, a mortgage, or final expenses.
The four roles in a policy
The insured is the person whose life is covered. The owner controls the policy and its permitted changes. The beneficiary receives the death benefit. The payer makes premium payments. One person may fill several roles, but ownership and beneficiary choices deserve attention.
Premium and death benefit
The premium is the payment needed to maintain coverage. The death benefit is the amount payable under the contract. Compare quotes with the same benefit, term, and payment schedule; a cheaper monthly payment may represent a different policy.
Underwriting and exclusions
Underwriting is the insurer's evaluation of an application. It can involve health questions and records even without an exam. Read exclusions, contestability provisions, and any initial benefit limits, rather than assuming an accepted application means every claim will be paid.
Beneficiaries need a second look over time
Marriage, divorce, new children, and other life changes may affect who should receive the benefit. Consider a contingent beneficiary as a backup. Naming a minor directly can create complications; discuss your circumstances with an appropriate adviser.
Before you accept a policy
Confirm the premium schedule, when coverage takes effect, any waiting period, and what happens if you stop paying. Review your policy during its free-look period, whose duration and rules depend on the contract and state. Keep a copy and let a trusted person know where to find it.