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.

What Does Life Insurance Cover?

Many people think of life insurance as a way to financially protect their loved ones in the event of their death. While this is undoubtedly a critical use for life insurance, it is not the only way life insurance can benefit you and your family. Life insurance can be used for various purposes, including financial security in retirement, funding a child’s education, or paying off debts.

The specific benefits of a life insurance policy will depend on the type of policy you choose. Still, some of the most common coverage types include death, living, and cash-value benefits.

  • Death benefits are paid out to your beneficiaries during your death.
  • In contrast, living benefits can cover medical expenses or other costs associated with a terminal illness.
  • Cash value benefits accumulate over time and can be used for any purpose, such as supplementing your retirement income or funding a major purchase.

No matter what your goal is, there is a life insurance policy that can help you achieve it.

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How does life insurance work?

Life insurance companies will pay a lump sum (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 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 essential to think about what would happen if you die. You need to decide how much money your family would need and what expenses they would have if you were gone.

Expenses That Life Insurance Covers 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.
What Does Life Insurance Not Cover

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 inevitable deaths. If someone commits suicide in less than 24 months after buying a policy, 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.

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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.

Next Steps

Now that you understand what is and is not covered by life insurance, it’s time to get a quote and see how much coverage you need. Every situation is different, so speak with an agent who can help tailor a policy to your specific needs. Don’t wait – request a quote today and be one step closer to protecting your loved ones.

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Need Help Getting Life Insurance Coverage?

If you have a preexisting medical condition and want to buy life insurance, you will need help from an expert. This person can help ensure you get coverage, so you don’t get declined.

Warning: Applying for life insurance without a medical exam can be risky. If you get declined coverage, it could be at least two years before you can get any life insurance.

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Frequently Asked Questions

What are five things not covered by life insurance?

The five things not covered by life insurance are preexisting conditions, accidents that occur while under the influence of drugs or alcohol, suicide, criminal activity, and death due to a high-risk activity, such as skydiving, and war or acts of terrorism.

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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