What Does Life Insurance Cover?

Pretty much everyone is aware of the benefits associated with life insurance. When you pass away, you want to make sure that there are provisions for your loved ones so that they won’t face financial hardship in your absence. This could mean leaving enough to cover your end-of-life expenses (burial, cremation, and so on), or you might purchase a policy that leaves a spouse, partner, children, or other beneficiaries significantly more money to pay off a mortgage and other debts, set up college or retirement funds, and/or compensate for the loss of your income for years to come, just for example. But you want to make sure that the life insurance policy you purchase will actually pay out on a claim, and this means understanding exactly what is covered by life insurance.

The coverage may depend on the type of policy you select. Let’s start with term life insurance. These policies provide benefits in the event of your death for a set period of time, to be determined when you purchase your policy. The term may be 10, 20, or more years, and so long as you pay your premiums on time and in full, your policy will pay out in the event that you expire during the term. Of course, there are some restrictions you should know about. For example, many policies will not pay out in the first two years if the cause of your death is determined to be suicide. Even in such instances, the provider will still likely disburse whatever the policy holder has paid in premiums up to that point. But the lion’s share of the policy will be denied to beneficiaries.

And policy holders over a certain age (say, 50) might only be eligible for partial coverage during the first two years. So if you pass away during this period, beneficiaries will not receive the full benefit of your policy. These days, risky behaviors are no longer an excuse to withhold payout on death benefit claims. Savvy insurance providers merely charge higher premiums to cover those who engage in behaviors that feature a higher than average risk factor for death. Pilots, military members, and other individuals at increased risk used to be denied life insurance payouts for participating in such activities. But these days, they are covered at a higher rate.

In truth, similar restrictions apply to whole life policies, as well. More particularly, they feature the notable difference that the term for such policies is your whole life. And you need to understand that laws regarding exclusions in coverage could vary from state to state. Although you can ask your insurance provider to explain the laws in your state, you might be better off doing some research on your own to ensure that you’re fully aware of the benefits and restrictions associated with life insurance in your state of residence. The amount of coverage your loved ones receive from your life insurance policy is determined by the policy you select and the amount you pay in premiums. But coverage could be impacted by when you die and the manner in which you pass away. You need to understand these particulars going in.