How Does Life Insurance Work?

Person Icon with body as shield placed within a broken circle to represent how life insurance works.

Looking to learn more about how life insurance works? The simple answer is you pay an ongoing premium (let’s say around $50 per month) to the life insurance company to keep your policy in force. When you die, your beneficiary(s) receives a tax-free sum of money called the death benefit.

You’re transferring the risk from your family carrying the financial hardship to the life insurance company, if you were to die unexpectedly.

You can use the tax-free lump-sum money to protect against loss of your income, funeral expenses, medical or nursing care expenses, debt repayments, and child care costs after your death.