1. Purpose: The primary purpose of life insurance is to provide financial protection to the policyholder’s beneficiaries, such as family members or dependents. The death benefit can help cover expenses such as outstanding debts, mortgage payments, education expenses, and ongoing living expenses.

2. Types of Life Insurance: Term Life Insurance: Provides coverage for a specific term, such as 10, 20, or 30 years. If the insured person passes away during the term, the death benefit is paid to the beneficiaries. Term life insurance generally offers higher coverage amounts at lower premiums but does not build cash value.

Whole Life Insurance: Provides lifelong coverage and includes a savings component called cash value. Premiums for whole life insurance are typically higher than for term life insurance, but a portion of each premium payment goes towards accumulating cash value, which can be accessed by the policyholder during their lifetime.

Determining Coverage Amount: When deciding on the coverage amount, factors to consider include the policyholder’s income, financial obligations, future expenses, and the needs of their beneficiaries. It’s important to evaluate the financial impact of the policyholder’s death and select a coverage amount that adequately addresses those needs.

3. Premiums: Policyholders pay regular premiums to keep the life insurance policy active. The premium amount is determined by various factors, including the insured person’s age, health, lifestyle, occupation, and the type and amount of coverage chosen. Higher-risk individuals, such as smokers or those with pre-existing health conditions, may have higher premiums.

4. Beneficiaries: Policyholders designate beneficiaries who will receive the death benefit upon the insured person’s death. Beneficiaries can be individuals or organizations, and the policyholder can allocate the death benefit among multiple beneficiaries as desired. It’s essential to regularly review and update beneficiary designations to ensure they align with the policyholder’s current wishes.

5. Riders and Add-ons: Life insurance policies may offer additional features or riders that can be added to the base policy for an extra cost. Examples include accelerated death benefit riders, which allow policyholders to receive a portion of the death benefit if they are diagnosed with a terminal illness, and waiver of premium riders, which waive premium payments if the policyholder becomes disabled.

6. Underwriting: When applying for life insurance, applicants typically undergo underwriting, which involves providing information about their health, lifestyle, and medical history. The insurance company assesses the risk associated with insuring the individual and determines the premium rate based on this evaluation.