Life Insurance FAQ:

What is life insurance?

Life insurance is a contract between you and an insurance company. You pay regular premiums, and in return, the company pays a lump sum—called a death benefit—to your chosen beneficiaries when you pass away. This money can help cover funeral costs, replace lost income, pay off debts, or support loved ones financially.

Who can be covered by a life insurance policy?

• Policyholder: The person who owns the policy and pays the premiums.

• Insured: Usually the policyholder, but you can insure someone else if you have an insurable interest (i.e., you'd suffer financially if they died).

• Beneficiary: The person or entity who receives the death benefit. You can name multiple beneficiaries, including family, friends, or charities.

What are premiums and how are they calculated?

Premiums are the payments you make to keep your policy active. They’re based on:

• Age

• Health status

• Lifestyle (e.g., smoking, risky hobbies)

• Type and amount of coverage

What types of life insurance are available?

Term Life Insurance: Covers you for a set period (e.g., 10–30 years). Lower cost, no cash value.
Permanent Life Insurance: Lifelong coverage with a cash value component. Includes whole and universal life.

What is the cash value in permanent life insurance?

Permanent policies build cash value over time, which you can borrow against or withdraw. It grows tax-deferred and can be used for retirement or emergencies—but it may reduce your death benefit if not repaid.

Can I buy life insurance for someone else?

Yes, but only if you have an insurable interest. For example:

• A spouse or child

• A business partner or key employee

You must prove that their death would financially impact you.

When should I buy life insurance?

The earlier, the better—especially when you're young and healthy. It’s also wise to consider life insurance during major life events like:

• Marriage

• Having children

• Buying a home

• Starting a business