New to buying life insurance? Learn how it works and what you need to understand to choose your coverage.

A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured's death.

Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It's important to note that death benefits from all types of life insurance are generally income tax-free.

Money placed in life insurance contracts is not as secure as one might think. There are 4 ways to dispose of your savings: total buyback, partial withdrawal, advance and pledge.

Total surrender of his life insurance policy

The total purchase must be included in the terms and conditions of a life insurance policy. It puts a definitive end to the contract. Only the subscriber may request it at any time during the term of the contract (except in the case of acceptance and except in certain cases) and he receives the value acquired under management. This value, if it is increased by capital gains, is taxable. A contract bought back can not be reopened.