Life insurance policies have two essential components. One is a death benefit, and the other is premium. As there are two types of insurance policies, term and whole. Term insurance plans consist of two components, whereas whole life insurance consists of three.

The death benefit is the amount of money the insurance company guarantees to pay the policyholder’s beneficiaries. For instance, the money would go to the children of a parent who passed away.

Premium is the money an individual pays to lock in his or her insurance coverage. This premium could either be paid monthly or yearly. Keep in mind paying more than once can result in extra costs. Cash value is the third component often found in Whole Life insurance plans. This serves two purposes; it is a savings account that the owner can use during the insurance program. The owner can also use it to pay for further premiums.