What Does Life Insurance Cover?

Shawn Plummer

CEO, The Annuity Expert

A life insurance policy can help provide funds for your family if you die unexpectedly. However, a life insurance policy doesn’t cover every type of death. So before you choose a plan, you should find out what it covers and does not cover. This guide will explain what life insurance covers and does not cover.

How does life insurance work?

Life insurance companies will pay a lump sum of money (tax-free) if you die to your beneficiaries.

There are two general types of insurance:

A term life insurance policy is the cheapest type of life insurance. It lasts for a set period, up to 30 years. When the time is up for that policy, the coverage will end.

Permanent insurance helps you save money and build up a cash value. It is a way to earn some extra money that can help when you retire, but it also protects loved ones like your spouse or children. Permanent insurance includes whole life insurance and universal life insurance.

You can choose several different types of life insurance. But before you choose one, it is important to think about what would happen if you die. You need to decide how much money your family would need and also what type of expenses they would have if you are gone.

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Expenses That Life Insurance Cover For Your Beneficiaries

You can use life insurance funds to cover a range of expenses after death, including:

  • Funeral costs
  • Medical bills
  • Monthly bills and expenses
  • Groceries
  • Co-signed debts
  • Mortgage
  • Student loans
  • Estate planning fees
  • Child or dependent care.
  • College payments
  • The cost of burial or cremation, a funeral, and other end-of-life expenses.

Types Of Death Covered By Life Insurance

Life insurance usually covers most causes of death, including:

  • Natural causes
  • Accidents
  • Homicide
  • Suicide

Every policy is different. Many insurance companies have a waiting period before they pay for certain deaths. If someone commits suicide in less than 24 months after buying a policy, then the beneficiary might not get any money. Before you buy a life insurance policy, make sure that you read the types of deaths it covers. Also, look to see what is not covered and any limitations or exemptions for certain types of death.

What Life Insurance Does Not Cover

Under some circumstances, the life insurance policy won’t pay out after you’re gone, leaving your beneficiaries without help. Here are four reasons life insurance won’t pay out to beneficiaries:

  • Expired life insurance policies
  • Fraudulent Activity
  • Criminal Activity
  • Extreme sports such as skydiving or bungee jumping.

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Compare life insurance quotes from 25 companies in seconds. Then, apply for coverage in less than 10 minutes.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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