Life insurance provides compensation to beneficiaries once the insured pass. It’s reassuring knowing that your loved ones will be taken care of even when you’re gone. But even the most comprehensive life insurance plans can’t cover everything. It’s important to know what is and isn’t covered by life insurance so your beneficiaries aren’t caught off guard.
Keep in mind that coverage varies depending on the policy. In general, however, a life insurance policy will not cover:
- Reckless endangerment
- Some pre-existing medical conditions
- Death while committing a crime
- Self-inflicted injuries
- Sexually transmitted diseases (HIV/AIDS)
- Overdose by drugs or alcohol
- Disability and certain critical illnesses (can be added separately)
- Mortgage insurance (can be added separately)
- Long-term care
Other situations may put a hold on the life insurance claim, such as if the insured is murdered and the beneficiary is a suspect. Until the beneficiary is cleared, the insurance claim will be withheld. If the beneficiary is found guilty of involvement in the homicide, the insurance claim will be rejected.
Death by suicide is another complicated case. The beneficiaries will only receive a lump sum if the insured dies by suicide within the first twelve months of the policy. Depending on the situation, the beneficiaries may receive 80%-100% of the total premium. If the insured dies by suicide a year or more after the policy was signed, the policy will be terminated, and the beneficiaries will not receive the benefits. This can vary by insurance agency, however, so be sure to discuss policy rules and limits with insurance agents heavily before signing onto a policy.
What Does Life Insurance Cover?
Now that it’s clear what life insurance doesn’t cover, it’s time to move on to what it does cover. Life insurance provides a lump sum payment to the insured’s beneficiaries in the case of:
- Accidental death
- Death by natural causes
- Death by health-related issues
- Monthly bills
- Everyday expenses
- Murder (without the beneficiary involved)
Every insurance agency varies. Be sure to know what kind of coverage you need and what amount will benefit your family the most. Discuss policy limits and coverage with your insurance agent. There may be additional coverage that you can purchase called “riders” which will cover some of the gaps that life insurance leaves behind. It’s generally recommended that you purchase life insurance that is 10-12 times your income for full coverage.
Also See: Life Insurance Contact