Life Insurance Coverage
Life insurance is one of the types of insurance which has so much demand from people globally. Indeed, everyone should get life insurance coverage once they can to enjoy the numerous benefits. Still, you should know that life insurance doesn’t cover every area as you might imagine.
In this post, you’ll get complete information on the details of life insurance coverage. You’ll learn the areas it covers and the area it doesn’t help you when making decisions on your life insurance. Hence, stick with this post to the end, so you don’t miss anything.
What Does Life Insurance Cover?
End-of-Life Expenses
Life insurance can also help cover the costs of end-of-life expenses. It may come as a surprise to learn that the average funeral costs $7,640, rising costs.
Examine the costs of the burial options you prefer and speak with your family about your final desires. It will help them make the arrangements it requires.
Making these decisions ahead of time is essential. It helps you figure out how much coverage you’ll need to help them meet their financial obligations for funeral costs.
Expenses for medical treatment and long-term care
Many life insurance plans provide an accelerated death benefit rider if a doctor diagnoses a policyholder with a terminal disease. This allows them to obtain a portion of their death benefit before passing away. Hence, you can pay for medical expenditures while still living, easing the financial load on your family after death.
Indeed, this is often a significant benefit. Still, policyholders should be aware that withdrawing a portion of their death benefit reduces their dependents’ overall amount.
For instance, you have a $400,000 life insurance policy and spend $100,000 on medical expenses while still living. Your beneficiary will receive $300,000 rather than your policy details indicating the full amount when you die.
Your legacy
If you wish to leave a financial legacy to certain organizations, you can name them as life insurance beneficiaries. This is an excellent way for policyholders to ensure that their loved ones are cared for. Also, it is assurance that they can continue to support the causes they care about after they pass away.
College tuition and education
Carefully factor in the total cost when determining how much coverage you’ll need for your child’s college tuition. The average annual cost of college tuition, according to CollegeBoard, is:
- Public two-year college in the district: $3,440
- A four-year private college costs $32,410.
- $23,890 for an out-of-state public four-year college
- $9,410 for an in-state public four-year college
Life insurance beneficiaries can use the money as they like. Hence, if you die, they could use the money to help them pay for their schooling.
Debts for which a co-signer is responsible
Assume you have ao-signed loans, such as a mortgage, car, or student loan. The other person will be entirely responsible for your debt when you die. As a result, it’s critical to have enough life insurance to cover your portion.
Even loans that a family member or loved one doesn’t co-sign could get in their hands after you pass away. Life insurance can cover the cost of these loans, allowing your loved ones to pay off any outstanding without bankruptcy.
Expenses and bills every month
You’re likely to contribute to the cost of rent, mortgage, groceries, utilities, child care, and other household expenditures. It is irrespective of whether or not you’re your family’s primary source of income.
As a result, many insurance experts recommend that customers buy a life insurance policy worth 10-15 times their current wage. This will allow your loved ones to continue living their current lifestyle after dying, relieving their financial burden.
Child care or dependent care
From daycare and after-school programs to nannies and other fees, life insurance policies can help cover childcare expenses. You may simply cover these payments and allow your loved ones to live better by getting a life insurance policy.
Estate planning
In addition to funeral costs, life insurance can cover the costs of estate preparation after a person’s death. In contrast to end-of-life expenses, estate preparation comprises engaging an attorney to close any remaining accounts in the decedent’s name. Also, it will inform the county and IRS of the death.
One can use a life insurance policy as an estate planning tool. The idea is to ensure that your heirs have prepared to manage legal and tax expenditures.
What Doesn’t Life Insurance Cover?
While life insurance offers numerous benefits to policyholders and their beneficiaries, it’s also important to know what it doesn’t cover. Some of the things that life insurance does not cover include:
Time beyond your subscription (for term life insurance)
Once the policyholder’s term has expired, the policyholder’s coverage is no longer current. If you obtain a 20-year term life insurance policy but don’t die before the term ends, your beneficiaries will not get payments.
If you want life insurance that doesn’t expire, whole life insurance is a great alternative. When a term life insurance policy ends, many companies offer options of converting it to a whole life insurance policy.
Fraud
Life insurance policies have a contestability period that lasts for two years after issuing the policy. If you die during this period and your company discovers you lied on your application, they may deny claims. Contestability periods usually kick in only if the policyholder dies in suspicious circumstances.
However, any misrepresentation could result in a claim denial, so double-check everything on your application. Another case is if a policyholder willingly commits a crime and dies due to the crime. Here, the beneficiaries are not fit to claim approval.
Exclusions
While rare, some insurance firms have exclusions when a policyholder’s beneficiary is not entitled to a payout. This includes incidents such as when the policyholder dies due to harmful activity.
Most times, companies apply exclusions to deaths that operating an aircraft causes. Furthermore, your insurance may include other exclusions depending on where you live in the United States. Make sure you read your policy thoroughly to discover if you’re an at-risk policyholder.
