Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the policy owner's death. In return, the life insurance policy owner agrees to pay a stipulated amount called a premium at regular intervals. The benefit is paid to the designated Beneficiary (or Beneficiaries) if an insured event occurs which is covered by the life insurance policy.

To be a life policy the insured event must be based upon life (or lives) of the people named in the policy. Generally, the beneficiary receives a stipulated amount upon the Life insurance policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions in life insurance policies are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.

Life based contracts tend to fall into two major categories: Policies created to protect by providing a benefit in the event of specified event, typically a lump sum payment. The second category is investment policies. The main purpose or objective is to facilitate the growth of capital by regular or single premiums.

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