What defines a life insurance policy?

A life insurance policy is fundamentally a contract designed to provide a financial benefit to the beneficiaries upon the death of the insured individual. This essential characteristic distinguishes life insurance from other types of insurance. It is meant to provide financial security and support for the insured's dependents or loved ones after their passing.

The primary objective of life insurance is to eliminate the financial burden that death can create, thereby ensuring that beneficiaries receive a predetermined sum of money, known as the death benefit. This can be crucial for covering living expenses, debts, education costs, and other financial commitments.

In this context, defining a life insurance policy centers on the provision of this benefit in the event of death, illustrating how it plays a significant role in financial planning and risk management for individuals and families.