A life insurance policy is a contract between an individual (the policyholder) and an insurance company, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. This financial protection helps beneficiaries cover various expenses, such as funeral costs, debts, and living expenses. 

There are several types of life insurance policies:

1. Term Life Insurance: Provides coverage for a specified period (e.g., 10, 20, 30 years). It is generally more affordable and straightforward, offering a death benefit without any cash value component.

2. Whole Life Insurance: Offers lifetime coverage with a death benefit and a savings component (cash value) that grows over time. Premiums are typically higher, but it combines insurance with investment.

3. Universal Life Insurance: Similar to whole life but offers more flexibility in premium payments and death benefits. The cash value earns interest based on market rates.

4. Variable Life Insurance: Includes a death benefit and a cash value that can be invested in various accounts, such as stocks and bonds. The value fluctuates based on the performance of these investments.

5. Simplified Issue Life Insurance: Requires no medical exam, only a health questionnaire. It's faster to obtain but often comes with higher premiums and lower coverage amounts.

6. Guaranteed Issue Life Insurance: Requires no medical exam or health questions, guaranteeing acceptance. Premiums are high, and coverage amounts are usually limited, making it suitable for those with serious health conditions.

When selecting a policy, consider your financial goals, budget, and the needs of your beneficiaries. Consulting with a financial advisor can help tailor the best policy for your situation.