No one likes to talk about what happens after they die, but if you have dependents, you might want to think about how to protect them financially after your death. A life insurance policy can give your loved ones the peace of mind they need – but what is life insurance, and what does it cover? Let’s take a look.
What Is Life Insurance?
This insurance is a type of contract between you and your insurer. You make regular payments, known as premiums, and in return, the insurer agrees to pay out a lump sum to certain individuals – known as “beneficiaries” – upon your death.
Can you use this insurance money for anything? Sure – once your beneficiaries receive it, they can use it how they wish. However, it’s commonly used to cover expenses such as funeral bills or to supplement your income if you die before your spouse.
Types of Life Insurance
There are two types of this insurance: term life and whole life insurance.
- Term insurance covers you for a fixed period of time e.g. 10 years and pays out if you die during this period.
- Whole life insurance covers your lifetime, so regardless of when you die, it still pays out.
Regardless of your policy, it will only pay out if you keep up the premium payments.
What Does Life Insurance Cover?
So, what does this insurance cover? Here’s a breakdown.
- Accidental death: Deaths caused accidentally e.g. drowning are usually covered by these insurance policies.
- Natural death: If you die due to a natural cause e.g. heart attack or old age, your policy covers this.
- Suicide: Most of these insurance policies cover suicide, but only after a qualifying period e.g. one year.
- Medical conditions: Depending on your level of coverage, your policy may pay out if you die from a chronic or pre-existing condition such as cancer. You must declare these conditions when you apply, though, or contact your insurer if you’re later diagnosed with an illness which affects your policy – otherwise you could void your agreement.
What Does This Insurance Not Cover?
This insurance covers most – but not all – eventualities. Here’s when your insurer may not pay out to your beneficiaries.
- Insurance fraud: If you lie on your application or deliberately omit information, your policy won’t pay out.
- High-risk activities: Unless you take out high-risk life insurance, your policy may not pay if you die during a dangerous sport or pastime e.g. skydiving.
- Criminal acts: While policies vary, benefits may not be paid out if a person dies while committing a criminal offense.
- Murder: Under the so-called “Slayer Rule”, a beneficiary won’t receive proceeds from your insurance policy if they intentionally cause your death. Others from your estate, however, can still receive proceeds.
Find a Plan With Healthedly
Choosing the right insurance policy can be tricky. The Healthedly team can help you choose between a variety of life insurance plans catered to your needs, and we’ll match you with competitive quotes.
Still looking for the right life insurance plan? We can help. Browse our insurance plans or request a quote today.