How Life Insurance Policies Work?

How does a life insurance policy work?

A life insurance policy is a contract between a person (the owner of the life insurance policy) and the insurance company.

The owner which can be the insured person, agrees to pay premiums to the insurance company in return for a death benefit being paid out by the insurer to there beneficiary of the policy upon the dearth of the insured person.

The owner of the policy chooses a beneficiary when purchasing the life insurance. The beneficiary is the one who receives the death benefit from the life insurance policy, usually tax free, when the person who is insured dies.

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