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What You’re Too Afraid to Ask: How Does Life Insurance Actually Work?


We know life insurance isn’t an easy topic to discuss. And if you’re reading this while trying to navigate the life insurance policy of a loved one who has passed away, you have our deepest sympathy.

To make things easier, we talked with our associates from our Auto-Owners Life Insurance Company to answer your FAQ surrounding how life insurance works. We hope it makes things a little easier for you.

  1. How does life insurance work?

  2. How does life insurance work upon death?

  3. Does life insurance actually pay?

  4. How long do you pay life insurance before it pays out?

  5. Can I cash in my life insurance before I die?


How does life insurance work?

Essentially, you pay for a life insurance policy, and when you die, that policy will pay the designated individuals or organizations (beneficiaries) the dollar amount specified (the death benefit) within the provisions of your policy.


The death benefit, for a personal policy, is often used by surviving family members to help cover funeral expenses, pay off debts and help replace lost income. Depending on how the policy was set up, the funds may also help pay for a dependent’s education and other legacy planning priorities specified in their trust.

Some important variables to consider when choosing a life insurance policy include:

  • How long you need to be insured

  • The amount of the death benefit

  • Whether or not the policy builds cash value

  • How long you are required to pay for the policy

Depending on your life stage, certain types of coverage may be more appealing to you. So, explore the options out there, which include three types of coverage:

  • Whole Life Insurance policies

  • Term Life Insurance policies

  • Universal Life Insurance policies

Continue reading at Auto-Owners Insurance here.

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