A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death. Typically, life insurance is chosen based on the needs and goals of the owner.
There are three types of life insurance: term, universal and whole. Term provides a benefit for a set period of time. Once the term ends, the insurance must be renewed. Universal lets you adjust premium payments, and the policy covers you for a lifetime. Whole is also intended to provide lifetime coverage, but the payments are fixed.