Life insurance is a contract between a life insurance company and a policyholder. A life insurance policy is a payment of a certain amount by an insurance company to designated beneficiaries upon the death of the insured in exchange for premiums paid by the policyholder during her lifetime.

In a life insurance policy, you must pay premiums for a set policy term in exchange for a full life cover from the insurance provider. Life insurance safeguards your loved ones' future by providing a lump sum amount known as the death benefit if an awful event occurs. After the policy term expires, certain life insurance plans pay out a maturity benefit.