Final answer:
Life insurance pays out when the policyholder dies, providing financial support to their beneficiaries. It is distinct from other types of insurance, like health or car insurance, which cover specific expenses related to medical care or vehicular damage.
Step-by-step explanation:
Life insurance is a type of policy that provides financial protection to an individual's family or beneficiaries after the policyholder passes away. It does not pay out when the individual gets injured, moves out of the house, or turns 18. Instead, a payout occurs when the insured individual dies, offering a sum of money to the designated beneficiaries. This financial support can help cover funeral costs, ongoing living expenses, or any outstanding debts left by the deceased. Life insurance operates by having policyholders make regular payments, known as premiums, to the insurance company.
Different types of insurance serve various purposes. For example, health insurance covers medical expenses, car insurance addresses costs associated with vehicular damage or accidents, and house or renter's insurance compensates for damage to a dwelling or stolen possessions. In contrast to these, life insurance solely focuses on the financial impact caused by the death of an insured individual.