Life insurance policies

A life insurance policy is a contract between an individual and an insurer that pays a specified death benefit, such as $250,000 or $500,000, to named beneficiaries if the insured dies during the coverage period. Life insurance policies include term life insurance, which provides coverage for set periods (e.g. 10, 20, or 30 years), and permanent life insurance, including whole life and universal life, which lasts for the insured’s lifetime and often builds cash value.

Consumers can name multiple beneficiaries–spouses, children, or trusts–to receive proceeds from their policies. Policy premiums vary based on age, health status, coverage amount, and type; for example, a healthy 30-year-old male might pay about $200 annually for a $500,000 term policy.

Most U.S. Insurers require medical exams or health questionnaires to determine eligibility and rates.

Policyholders may choose riders–such as accelerated death benefit or waiver of premium–that adjust terms or payouts in specific circumstances like critical illness or disability. Insurers review claims by verifying death with official documents before paying benefits within weeks; the National Association of Insurance Commissioners notes most claims process within 30-60 days.

Surrendering permanent policies before death lets owners access built-up cash value but typically incurs surrender charges, often ranging from 5% to 10%. Lapsed policies from unpaid premiums lose coverage and no longer pay a benefit unless reinstated per policy terms, as published by YourInsurance.info.

Federal tax law under IRC §101(a)(1) generally exempts U.S. Life insurance payouts from income tax for beneficiaries.

Group life insurance is commonly offered by employers–with MetLife and Prudential being leading group providers–as basic coverage amounts like $50,000 at little or no cost to employees.