What Does Life Insurance Cover & What isn’t Covered?

what does life insurance cover
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    When you purchase a life insurance policy, your number one goal is that it will pay your beneficiary when you die – however death can happen in a variety of ways and it’s possible your policy may not cover them all. Then what does life insurance cover? 

    Today we’re going to dig deeper and answer that question, but different life insurance policies provide different types of coverage — and durations. There are even some some policies that provide coverage in addition to the actual death. Make sure you’re clear with the type of coverage you’re purchasing before you apply for coverage.

    >>For Later: When you’re finished, be sure to read up on the Top 10 life insurance companies before you apply for coverage.

    What does life insurance cover?

    How much will your life insurance policy cover you when you die? What does life insurance cover? It will usually boils down to the type of life insurance policy you buy and how much coverage your policy has. We’ve put together a comprehensive resource to show you what is covered and what is not.

    Your Mortgage

    Your home may possibly be your biggest asset and expense. Paying off your mortgage can provide your family with the stability they’ll need if you were to pass away unexpectedly. Your family will no longer be receiving your current and future income.  

    Your life insurance policy will provide them the ability to make the proper decisions. Will they pay it off entirely? Will they downsize? Will they move near closer to their loved ones? Knowing that your life insurance policy can relieve your family’s stress by helping them deal with this tough time is priceless. You can even cover your mortgage without a medical exam with a no-exam life insurance policy.

    Final Expenses

    When you die, there are quite a few final expenses that occur that you may not even be aware of. Obviously a funeral will cost money and they wouldn’t be described as cheap. Funerals can range from $7,000 to $12,000 or more — depending on many pricing factors. The stress of grieving is significant all by itself – it’s compounded when an unexpected bill is tacked on.

    Everyday Bills

    The bills that arrive monthly will keep coming even after you’ve passed. If you’re the primary or secondary breadwinner — your family will need help paying for the essential such as utilities, insurance, groceries, car payments and more. It can seem like these everyday bills never end. A life insurance policy can prevent a major blow to your family’s standard of living and help them with their future finances.

    Child Care & Dependent Support

    As you’re well aware of, children aren’t cheap. The cost of raising a child is expensive even if you don’t factor in college (more on that soon). Your life insurance policy will be able to help pay for child care, sports, and extracurricular activities. This situation is even more significant if you have children with special needs. Your children may require therapies and other support on top of the typical costs- life insurance can help cover these situations.

    Stay-At-Home Parent

    Stay-at-home parents have been on the incline recently. More and more moms and dads are structuring their lives to have at least one parent home full time. If you’re the breadwinner and you die, your spouse is likely going to have to return to the work force. However, if you’re the stay-at-home parent and you pass away, your working spouse will have to begin paying for all the services that you currently provide.  


    Just like the bills that keep coming, your debt doesn’t go away when you die. Your debts such as student loans, credit cards, mortgage, sba loans and car loans – all of these still need to be paid back. Your partner or spouse will be responsible for these debts if they are an official co-signer. When you buy a life insurance policy make sure to factor in all of your debts.


    Life insurance provides coverage for today expenses — as well as tomorrow expenses. One of the future expenses that life insurance can cover is college tuition. Make sure you calculate how much college will cost if you have children now or plan on having a family in the near future. College isn’t cheap and tuition seems to rise every year.

    Leave a Legacy 

    Did you know you can use life insurance to fund all of your legacy goals? Life insurance can help you leave an inheritance for your family or loved ones or provide your favorite charity a financial gift. Permanent life insurance is the preferred type of coverage when it comes to leaving a legacy. Policies like whole life, universal life and indexed universal life can provide you a flexible policy and peace of mind that your legacy goals will be reached.

    Who can benefit from this strategy of leaving a legacy?

    Anyone whose goal it is to:

    • Leave a certain amount of money to their charity or heirs
    • Have a way to transfer their wealth with tax efficiency
    • Provide continuing care for a family member or loved one
    • Owns real estate, farmland or other assets that cannot be divided easily among heirs or charities
    • Trying to efficiently divide assets among their heirs or charities (Good for owners of real estate, farmland, and businesses)

    What does life insurance not cover?

    It would be great if life insurance covered every and all scenarios. Unfortunately this isn’t the case. Here are some common situations that may not be covered:

    • Suicide
    • War
    • Certain Hobbies or Occupations
    • Misrepresentation or Lying

    If you were to commit suicide, some life insurance companies won’t pay depending on when the death occurred — typically in the policy’s 1st two years.  Some companies will only reimburse your family or beneficiaries for the life insurance premiums that have been paid and nothing more.

    If you happened to be killed in a war or from a terrorist attack your life insurance policy may not cover you. If you partake in certain high risk activities or occupations, you may not be covered.

    Lastly, when life insurance companies find out that you concealed a pre-existing health condition such as cancer, heart disease or lied about a question on the application — your loved ones may never get a dime.

    Choosing the right coverage for the people you love

    At the end of the day, your life insurance policy is all about protecting your family and loved ones.  The right type of insurance coverage isn’t the same for everyone. 

    A good way to find out how much life insurance you’ll need is to use this free calculator to help you understand your financial situation. Once you’ve found out how much coverage you need, you can quickly get a instant quote, apply online, and if you’re approved — get your coverage started.

    It’s so important to research these policies and find the right one for your needs, but don’t get so overwhelmed with all the details that you skip buying a policy entirely. We can help make this entire process easier and less stressful. We don’t use just 1 company for our clients — we us over 60 carriers to find the best one for your specific situation. Simply give us a call and we’d be happy to assist in the process.

    Michael Quinn

    Michael Quinn

    Michael is a licensed life insurance agent, expert & owner of Life Insurance Blog. LIB has helped thousands of shoppers understand life insurance and secure affordable coverage.

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