Life policy definition
This refers to a life insurance policy. The purpose of life insurance is to protect individuals from suffering financial hardship as a result of someone’s death. An individual that takes out a life insurance policy makes premium payments to the insurer. If the policyholder dies, the insurer pays a death benefit to the deceased policyholder’s family or next of kin, the amount of which is based on the amount of premium payments made during the policy.
The death benefit is the amount of money the policyholder’s beneficiaries will receive from the insurer if/when the person who took out the policy dies. Premium payments are made to the insurance company by the policyholder while alive, and these payments are based on actuarially-based statistics to determine how much the insurer needs to cover mortality costs. These can often see insurers look at someone’s financial history, health and other factors that influence the risk to the insurer in providing a policy to someone.