Life Insurance

Life insurance is a contract between the insurance company and an insured in which the company promises that at the death of the insured, the company will pay a certain amount of money to a person the insured designates in the contract if that person survives the insured. In return for the promise to pay, the insured will pay the life insurance company a premium. Life insurance is considered a third party beneficiary contract because it is made for the benefit of a person who is not a party to the agreement.  Also, life insurance is considered a type of will substitute because it is functionally equivalent to a will, but the assets are transferred to the beneficiary within the donee’s lifetime.