How Life Insurance Works at Life

How Life Insurance Works. 19.1 how life insurance works. These payments are called premiums. in exchange, you are covered from certain risks.

Essentially, when you purchase a life insurance policy, you’re exchanging regular premium payments for a lump sum payment, also known as a death benefit, to your loved ones when you die. When you buy insurance, you make payments to the company. In exchange, the company pays a death benefit to your.

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That’s it — no frills, just straightforward financial protection for the people you care about. In this section we elaborate on the manner in which life insurance products are able to pay the promised benefit: A higher coverage also means that you must pay a higher premium amount. Insurance is based on the idea that spreading the risk of a loss, such as a fire or theft, among many people makes the risk lower.