Your requirement for life insurance will always be determined by your personal life objectives and financial obligations. Your life insurance coverage will most likely need to change as your life circumstances change. After all, a single retiree's life insurance needs are likely to be very different from those of a young married couple with children. At its most basic, life insurance, like any other type of insurance policy, is a contract that you sign. You agree to pay a monthly premium to a life insurance company, and in exchange, they guarantee that if you die, your beneficiaries will receive a predetermined lump-sum payment. This payment is known as a death benefit and is usually tax-free under federal law.