What does life insurance cover?

Life insurance companies pay a death benefit to the policyholder's beneficiaries if they die from natural causes, an accident, suicide, or murder. There are some rare situations when the policyholder won't be covered by life insurance, like if they lied on their application.

The beneficiaries can use the death benefit for anything, like a mortgage, college savings, or funeral expenses.

What does life insurance cover?

What’s covered by life insurance falls into two categories: the causes of death insured by the policyholder's life insurance policy and the expenses the policy’s death benefit can go toward.

What causes of death are covered by life insurance?

Life insurance policies cover almost all deaths, with a few exclusions. As long as the policy is active when the insured dies, life insurance providers will pay out if their death is caused by:

  • Natural causes: Like a heart attack, old age, or illnesses like cancer

  • An accident: Including accidental overdose from a prescribed medication

  • Suicide: As long as it occurs after the policy’s two-year suicide clause period ends 

  • Homicide: Unless the beneficiary played a role in the murder

  • War or terrorism: Usually — some insurers do include exclusions for these causes of death

Questions or want to learn more?

What expenses are covered by life insurance?

The beneficiaries can spend the policy’s death benefit however they want. Beneficiaries usually use the financial support for:

  • Everyday expenses: Like monthly bills, groceries, and other household essentials

  • Outstanding debts: Including a mortgage, credit card debt, private student loans, or auto loans 

  • Childcare: Replacing care provided by a spouse 

  • End-of-life expenses: Such as funeral expenses or end-of-life medical care

  • College costs: To fund continuing education for your spouse or tuition for your children

If the policyholder has certain policy add-ons called riders, they can withdraw part of the death benefit while they're alive. They need to have a qualifying condition, such as a terminal illness or a disability, and the money can only go toward related medical costs.

What is not covered by life insurance?

The beneficiaries won’t get the death benefit if the policy is expired or in situations involving fraud, certain criminal activities, or policy exclusions:

  • Expired policies: Policies only stay active while the policyholder pays their premiums and as long as the policy’s term. If the coverage expires or lapses before the policyholder dies, their beneficiaries don’t get the death benefit.

  • Exclusions: If the policyholder has a dangerous hobby, like skydiving, they can get cheaper coverage by adding an exclusion into their policy, but then the policy won’t pay out if their death is skydiving-related.

  • Fraud: If the policyholder lies on their life insurance application, their provider can cancel their policy while they’re alive or deny or reduce the payout when they pass away.

  • Criminal activity: If the policyholder dies while committing a felony, their provider may not pay out. If a beneficiary commits a crime to try to get the insured's insurance money, they’ll be denied a payout.

How quickly does a life insurance policy pay out?

Providers usually take two weeks to two months to process and pay out a claim after it’s been filed. Depending on the policyholder's state, their local insurance department might require insurers to pay out within 30 to 60 days of receiving a claim. 

The payout can be delayed if the insured dies within the first two years of the policy (the contestability period). During this time, their provider can review their application for intentional misrepresentations before approving the claim. A review could delay payment for up to 60 days.

Buying life insurance protects the insured's loved ones from a worst-case scenario. As long as they're honest on their application, their policy will cover almost any cause of death, leaving their family with financial assistance for any of their present and future needs.

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