What typically triggers the payout of a life insurance policy?

The payout of a life insurance policy is typically triggered by the insured's death. When the policyholder passes away, the insurance company is obligated to pay the death benefit to the designated beneficiaries, assuming the policy is in force and all requirements have been met, such as premium payments. This is the fundamental purpose of life insurance: to provide financial protection to beneficiaries after the policyholder's death.

In terms of context, a policy lapse occurs when the policyholder fails to pay premiums and the policy is no longer active, meaning no benefits would be paid out in that scenario. Policy maturity refers to the point at which an endowment or a whole life policy reaches its stated maturity date, leading to a payout. However, this is not the typical scenario for most life insurance products, which primarily focus on death benefits. The declaration of dividends pertains to the financial performance of mutual life insurance policies and does not trigger a payout; it simply represents a return of excess premiums to policyholders.