Life insurance is a form of insurance policy that insurance providers offer. In exchange for monthly premiums, the insurer pays out a fixed amount after the policyholder dies. This amount goes to the beneficiaries that you, the policyholder, name — usually including children, spouses, or other family members. Life insurance policies can serve as a financial cushion for the dependents of policyholders. 

There are terms such as the death benefit, premium, and cash value in life insurance policies. 

Death benefit – refers to the fixed amount the insurance company gives the beneficiaries in the event of the policyholder’s death. The policyholder must choose the death benefit amount based on the estimated quantity the beneficiaries need to cover their future needs. The insurance company will let you know if there’s an insurable interest and whether or not you qualify. 

Premiums – refer to the monthly payments the policyholder must pay for insurance. 

The premium cost is partly determined by how likely it is for the insurance company to pay the death benefit based on their life expectancy. Some factors influence life expectancies, such as age, gender, occupational hazards, and high-risk hobbies. The higher the death benefit amount, the higher amount the insured will pay. 

Cash value – serves as a type of savings account that the insured can use while alive. The policyholder can also use it to pay the premiums or to purchase additional insurance.