How does life insurance work?

Understanding how life insurance works will help you make informed decisions about your coverage.

Paying for your policy 

To keep your life insurance, you must pay regular premiums. Premiums are paid monthly.

Choosing your beneficiaries 

When purchasing a life insurance policy, you designate beneficiaries who will receive your death benefit. Beneficiaries can be individuals, but they may also be organizations.

If you choose more than one beneficiary, you can allocate a percentage or amount to each beneficiary.

Death benefit payment

In the event of your passing, your beneficiaries can file a death claim with the insurance company. If the claim is approved, the insurance company would distribute the death benefit to your beneficiaries.

Types of life insurance 

There are two main categories of life insurance: term life insurance and whole of life insurance.

Term life insurance provides you with coverage for a specific period. For example, 25 years.

Whole of life insurance offers lifelong coverage. Although typically more expensive, it includes a savings component known as cash value.

Reviewing and updating your coverage 

Reviewing your life insurance coverage periodically ensures it still aligns with your needs. The birth of a child or marriage could change the amount of cover needed. Similarly, paying off a mortgage could change the payout amount your loved ones would need.