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 Life insurance is a type of insurance contract. When you purchase a life insurance policy, you agree to pay premiums to keep your coverage intact



Insurance policies are often in place for a specific period of time. This can be referred to as the policy term. At the end of that term, you need to renew the policy or buy a new one. With some types of insurance, you choose a beneficiary, the person you want to receive the policy’s benefits or payments. When you buy an insurance policy, part of your responsibility includes paying a fee called a premium. Some premiums are paid monthly, like health insurance. Others may be paid once or twice a year, like auto or homeowner’s insurance. The cost of your premium generally depends on how much of a risk you are to the insurance company. In addition to the premiums, most insurance policies include a deductible. That’s the amount you have to pay first, before the insurance company pays their share. For example, if you have a $500 deductible on your homeowner’s policy and a storm causes $3,000 in damage, you will pay $500 and your insurance company will pay $2,500. With some policies, you can choose your deductible. Usually, a higher deductible means a lower insurance premium.

TIP A good rule to live by is to try to have an emergency savings fund to cover the cost of a deductible should an accident occur.

Life insurance is a contract between you and an insurance company. Essentially, in exchange for your premium payments, the insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death. Your beneficiaries can use the money for whatever purpose they choose. 

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