Life insurance - talk about a misnomer! Fire insurance policies pay when there's a fire; auto accident policies pay when there's an auto accident; disability insurance policies pay when you're disabled; but life insurance policies pay out when you're ... dead? "Life" insurance should really be called "death" insurance.

There are several different types of life insurance. The most basic type of life insurance is called "term" insurance. Term insurance is pure life insurance. Pure insurance is essentially a bet.

One of the basic premises of a life insurance contract is that as the insured, you will do your best to live as long as possible. To ensure that the game is played fairly, and the odds remain constant, only certain people can buy life insurance on you, such as you, your spouse, maybe your business partners. Generally these are all people who have are interested in having you live as long as possible.

If perfect strangers were allowed to buy life insurance on you, then they might try to collect before nature runs its course - which is not a desirable social policy.

Say you buy 10 year term insurance. As long as you pay your premium each year, the insurance remains in force. If you die while the insurance remains in force, the insurance company pays (hopefully) your named beneficiary the insurance proceeds.

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