What is life insurance?
Life insurance is a contract that people take out with an insurance provider where the person pays a premium (generally a monthly payment). In return for paying this premium, the insurance provider agrees to pay a specified amount to certain beneficiaries if the insured dies (and this paid amount will generally be much higher than the amount of premium payments made). Generally, the person who takes out the insurance policy and owns it is the insured person - however, situations can arise where someone takes out an insurance policy for another, such as covering their spouse or child, when they have a strong financial and insurance interest in that other person.
Life insurance benefits (the payments an insurance provider must pay when the insured person dies) are not part of insured person’s probate estate, since the benefit payments go directly to the beneficiaries of the insurance policy, regardless of any will provisions or state intestacy statutes. There are several types of life insurance, with the three most common being term life insurance, whole life insurance and universal life insurance.