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What Does Life Insurance Cover?

Key Takeaways

  • Final Expenses: Life insurance can cover the cost of final expenses, such as funeral expenses, medical bills, and outstanding debts.
  • Income Replacement: If the policyholder is the primary breadwinner in their family, life insurance can provide income replacement to their beneficiaries in the event of their death.
  • Education Expenses: Life insurance can help cover the cost of education expenses for the policyholder’s children or grandchildren.
  • Estate Taxes: Life insurance can help cover estate taxes for individuals with large estates.
  • Charitable Donations: Life insurance can also be used to make charitable donations, either through a bequest in the policy or by naming a charitable organization as a beneficiary.

Introduction to Life Insurance

Life insurance is an important way of protecting those who depend on you financially if something unexpected were to happen, such as your death or a serious illness or injury. It provides financial security for people who rely on you, such as your loved ones and family.

Having life insurance in place can help your family maintain their standard of living, pay off large debts, and provide educational opportunities for children and grandchildren. It can also help with funeral costs and other final expenses. In short, it’s essential to know what kind of coverage you need and how much coverage you need.

It’s also important to understand the different types of life insurance that are available and the differences between them. With so many options, it can be difficult to know which type of policy is right for you and your family. That’s why it’s important to take the time to understand all of the options and determine which type of policy is best for your situation.

In this guide, we’ll cover the basics of life insurance, who needs life insurance, what does life insurance cover, different types of policies available, how to choose the right policy for you, the application process, buying life insurance online, the claims process, common mistakes to avoid, and frequently asked questions about life insurance.

What is Life Insurance?

Life insurance is a type of financial product that can provide financial protection to someone in the event of death or serious illness. It can help provide security and peace of mind for family members and loved ones by ensuring that their financial needs are provided for.

The two main types of life insurance coverage are term life insurance and permanent life insurance. Term life insurance provides coverage for a set period of time, such as 10 or 20 years, while permanent life insurance provides coverage for a lifetime. Generally speaking, term life insurance is more affordable than permanent life insurance.

Typically, anyone over the age of 18 who is in good health can apply for life insurance. Those with certain health conditions or high-risk professions may be excluded from coverage.

Having life insurance provides several benefits. First, it can provide financial support for your family in the case of an unexpected death or other disaster. It can also provide the peace of mind that comes from knowing your family will be financially secure if something happens to you. Furthermore, life insurance benefits can be used to pay off outstanding debts, such as mortgages and car loans, as well as providing funds for education, retirement or other investments.

Who Needs Life Insurance?

Life insurance is an important financial product for individuals at any stage of life. Knowing when you need life insurance and what type of policy is best for your circumstances can make a big difference down the line. There are several life stages when it is particularly important to have adequate life insurance coverage in place.

Young Adulthood

When you are just starting out, you may not think you need life insurance yet. However, if you have student loans or other debts, life insurance is a smart way to ensure that those debts will be taken care of if something happens to you. It can also help protect your loved ones from financial hardship if you were to pass away unexpectedly.

Getting Married and Starting a Family

When you get married, both partners should consider getting life insurance. If one partner passes away, the other will likely still need to pay for their children’s education and childcare expenses, as well as other debts. An adequate life insurance policy can help protect your family from these kinds of financial pressures.

Retirement Planning

As you get older and start thinking about retirement, life insurance can be a great way to provide additional income for your spouse or other dependents. Many life insurance policies offer cash value that can be withdrawn or borrowed against during retirement. This can serve as a valuable source of supplemental retirement income.

Consider Your Needs

When it comes to life insurance, it’s important to consider your individual needs and circumstances. Having life insurance in place at the right times during your life can provide invaluable protection and peace of mind. Do your research and talk to an insurance professional to find the best life insurance plan for your situation.

What Does Life Insurance Cover?

Life insurance protects you and your loved ones financially during times of loss or hardship. It provides a certain amount of money upon the policyholder’s death, which can be used to cover medical bills, funeral expenses, and other living costs. The coverage varies from policy to policy, so it is important to understand what is typically covered by life insurance policies and any exclusions that may apply.

Types of Coverage

Most life insurance policies are categorized as term life, whole life, and universal life. Term life insurance provides coverage for a specific period of time (such as 10 or 20 years) and pays out the amount of the face value if the policyholder dies within that specified time. Whole life insurance covers the policyholder until their death and usually provides an investment component such as cash value growth. Universal life is a combination of both term and whole life insurance and allows policyholders to build cash value over time and adjust their premiums.

Coverage Amounts

The amount of coverage you choose will depend on your individual needs and budget. Typically, the amount of coverage should be equal to the policyholder’s annual income, plus additional funds to cover the cost of final expenses like medical bills, funeral expenses, and other debts. If you are married, you may want to purchase enough insurance coverage to replace your spouse’s income in addition to yours.


Most life insurance policies include provisions that state that the policyholder’s death must be accidental or from natural causes in order for the policy to payout. Other exclusions may include suicide and pre-existing medical conditions. It is important to read the policy thoroughly and understand any exclusions.

Choosing The Right Life Insurance

When choosing life insurance coverage for yourself or a loved one, it is important to review the terms and coverage amounts to ensure that it meets your current and future needs. It is also important to understand any exclusions that may apply to the policy. By understanding what is typically covered by life insurance policies and any exclusions that may apply, you can make sure that you have the best coverage options available to protect you and your loved ones.

Types of Life Insurance Policies

Life insurance policies come in a variety of forms—some are designed to provide a benefit upon the policyholder’s death, other policies may pay out over an extended period of time or in the event of the policyholder becoming seriously ill. It is important to understand each type of policy and their advantages and drawbacks, so that you can choose the best option for your situation.

Term Life Insurance

Term life insurance is the most basic type of life insurance policy. It provides a pre-determined financial benefit upon the death of the policyholder, with no additional cash value. The policy only pays out if the policyholder dies while the policy is in force. Term life insurance is generally affordable and offers flexibility as it can be tailored to an individual’s specific needs. However, it does not build up equity or provide any additional benefits while the policy is in effect.

Whole Life Insurance

Whole life insurance is a type of permanent life insurance policy that covers the policyholder until death, no matter when that occurs. This type of policy builds up a cash value as the policyholder continues to pay premiums, and the policyholder can also borrow against that cash value or use it as collateral for a loan. Whole life insurance is more expensive than term life insurance but does offer some addition security.

Universal Life Insurance

Universal life insurance is a type of permanent life insurance policy that has flexible premiums and coverage options. This type of policy allows the policyholder to adjust their coverage as their needs change and offers a level of protection against changing economic conditions. Universal life insurance is more expensive than term life insurance and may require a medical exam. However, it does offer the possibility of accumulating cash value over time.

Convertible Life Insurance

Convertible life insurance is a type of policy that can be converted from a term to a permanent life insurance policy without the need for another medical exam. This type of policy allows policyholders to maintain their coverage without having to reapply. Convertible life insurance is typically more expensive than regular term life insurance, but it does offer the advantage of potentially lower premiums if the policyholder’s health improves.

It is important to weigh the pros and cons of each type of life insurance policy before deciding which is best for your situation. Consider the level of coverage you need, the amount of money you are willing to pay in premiums, and the length of time you need the policy to stay in force. Taking the time to understand each type of policy will help ensure that you make the best decision for your needs.

How to Choose a Life Insurance Policy

When it comes to choosing the best life insurance policy for your needs, there are several important factors to consider. It’s important to take the time to understand each of these components and how they can affect the coverage you receive.

The first factor to consider is the type of life insurance you need. There are many different types of life insurance policies available, such as term life insurance, whole life insurance, and universal life insurance. Each type offers different levels of coverage, so it’s important to research which one is right for you and your unique situation.

The second factor to consider is the amount of coverage you need. This depends on your personal circumstances and goals, such as your age and income. You should also consider your family’s current and future needs, including any debts or investments that will be left behind in the event of your death.

The third factor to consider is the cost of the policy. Life insurance can be expensive, so you want to make sure that you find the most affordable policy that still provides the coverage and protection you need. Taking advantage of discounts and comparing quotes from multiple insurers can help you get the best deal.

The fourth factor to consider is the quality of the insurer. When selecting an insurance company, look for one with a good track record of paying out claims and customer service. Read reviews and ask friends and family for recommendations. You may also want to check if the insurer has an A rating from organizations such as A.M. Best.

Finally, it’s important to review your policy regularly to ensure that your coverage still meets your needs. As your life changes, so do your insurance needs, so make sure to keep up with any changes and update your policy accordingly.

Taking the time to research the different types of life insurance policies available and considering all of the above factors when choosing your policy will help you find the best life insurance plan for your individual needs.

The Application Process

Applying for life insurance is easy. Most applications can be done online or over the phone in a matter of minutes. There are a few key pieces of information you need to have before you start the application process.

  • Your Social Security number
  • Your driver’s license or other government-issued identification
  • Income and asset information
  • Information about any medical conditions or lifestyle habits (e.g., smoking)

You may also need to provide additional documents such as medical records or bank statements. Once you have all the necessary information, the application process itself is relatively straightforward.

Most life insurance companies will ask you some questions about your health, lifestyle, and occupation. It is important to be honest when answering these questions as the company could refuse to pay out the policy if it finds out that you have deliberately lied or omitted information.

Once you have submitted your application, the insurance company will assess the risk associated with offering you cover. This assessment process may involve taking a medical exam and/or requesting more information from you. The company will then decide whether or not to offer you a policy and will send you a letter detailing their decision.

If your application is approved, you will then need to sign and return the relevant paperwork. This may include a policy application form, terms and conditions document, and direct debit forms. Once all of the paperwork has been signed and returned, your policy will come into effect.

The application process for life insurance is relatively simple and straightforward. Taking the time to ensure you have all the necessary information to hand and being honest in your answers will help to ensure the process is as smooth as possible.

Buying Life Insurance Online

These days, many of us are accustomed to making purchases online, from groceries to clothes and even insurance. When it comes to buying life insurance online, there are some important things to consider to make sure you get the best value for your money.

The biggest benefit to purchasing life insurance online is convenience. You can compare and evaluate different policies at any time of the day, without ever having to leave the comfort of your home. What’s more, the process is often fast and efficient, so you can get started and finish in a matter of minutes.

Another advantage of buying life insurance online is that you can typically access more information on the policy than you would if you were to purchase in person. This allows you to make a more informed decision when selecting the best policy for you.

While there are many benefits to buying life insurance online, there are also some potential pitfalls you should look out for. Firstly, you’ll be dealing with a lot of personal information, so it’s important to only use reputable websites and insurers. Make sure you read the fine print and check what kind of customer service you have access to if you have any questions or concerns.

Additionally, it pays to shop around and compare different policies, as prices can vary significantly from one insurer to the next. You should also be mindful that you won’t have the opportunity to speak to an experienced financial advisor, which can be extremely useful when making major decisions about your insurance.

Finally, make sure you understand the specific terms and conditions of the policy before signing anything. Pay special attention to the claims process, in case you need to make a claim down the line.

Buying life insurance online can be a great way to find the right product and save time and effort. However, it’s important to do your due diligence and ensure you’re fully informed of all the risks and benefits associated with the policy before you commit.

The Claims Process

If you ever need to make a claim on your life insurance policy, it is important to understand the claims process. Life insurance claims can be complicated and emotionally challenging, so it is good to know what to expect before you start the process.

Common steps involved in the claims process include:

  • Notifying the Life Insurance Company – As soon as you are aware of an illness or death that may trigger a life insurance claim, contact your insurer. They will lodge the claim and tell you what paperwork is required.
  • Gathering the Required Documentation – Life insurance companies will have their own list of documents they require to assess a claim. These may include death certificates, medical records, police reports or other types of verifying evidence.
  • Submitting the Claim – After you have gathered all the documentation, you will need to submit them to the life insurance company. You will likely have to fill out forms and provide further information to support the claim.
  • Assessment and Verification – The insurer will conduct an assessment and verification of the claim. This includes assessing the evidence, confirming the cause of death, and evaluating any other factors. It may take some time for the insurer to complete this process.
  • Payment Approval – Once the claim is validated, the life insurance company will authorise payment. This can take up to several weeks, depending on the complexity of the claim.

It is important to remember that the claims process is not always straightforward and will vary from company to company. If you need help understanding any part of the process, contact your insurer for support.

Common Mistakes to Avoid When Taking Out Life Insurance

Making sure you’re adequately covered for life insurance is by no means an easy process. That’s why it’s important to take extra care of this responsibility and avoid making any costly mistakes. Here are some of the most common mistakes to be aware of:

  • Not having enough coverage: Make sure you have enough coverage to meet both your short- and long-term needs. Be sure to factor in your current lifestyle and expenses, as well as any obligations you may have, such as a mortgage.
  • Not including beneficiaries: It’s important to designate the people or organizations who will receive the benefits from your life insurance policy. Specifying primary and secondary beneficiaries and updating them whenever your circumstances change can ensure that your wishes are respected.
  • Failing to review your policy: As your circumstances change, you’ll want to review your life insurance policy on a regular basis and adjust it accordingly. Failing to do so could mean you’re paying for coverage you no longer need, or worse, that you’re not covered if something unexpected were to happen.
  • Not considering other insurance: It’s important to consider other types of insurance when deciding on your life insurance plan. Health insurance, disability insurance, and other types of coverage can help cover costs related to accidents, illness, or injury.

Making sure you understand what you’re signing up for when taking out life insurance is vital. By avoiding the above mistakes, you can help ensure that your loved ones are appropriately protected in the event of an emergency.

FAQs About Life Insurance

Are you wondering what life insurance covers, and if it’s right for you? Here are some commonly asked questions about life insurance to help you understand more about the topic.

Who Needs Life Insurance?

Life insurance is important for anyone who has a dependant that relies on them financially. This could be a spouse, children, parents or other family members. It can also provide financial security in the event of the policyholder’s death. It is important to note that while life insurance may be beneficial, it is not always necessary. The decision to purchase life insurance should depend on your individual circumstances and needs.

What Does Life Insurance Cover?

The specific coverage of a life insurance policy depends on the type of policy chosen. Generally speaking, life insurance is designed to provide a lump sum of money to the policyholder’s beneficiaries in the event of the policyholder’s death. This money is meant to provide financial security and replace the policyholder’s lost income.

What Are the Different Types of Life Insurance?

The two main types of life insurance are term life and permanent life. Term life provides coverage for a specific period of time and is usually the most affordable option. Permanent life policies, including whole and universal life insurance, provide lifetime coverage and typically offer additional benefits such as a cash value that accumulates over time. It is important to discuss your options with an insurance professional before selecting the best life insurance policy.

How Do I Choose the Right Policy?

Choosing the right life insurance policy can be a difficult and confusing process. Consider your current life stage, long-term goals, financial needs and budget when selecting a life insurance policy. It is also important to pay attention to the fine print and understand the exclusions and potential risks associated with the policy. When in doubt, talk to an insurance professional who can provide guidance and advice.

Are There Any Additional Resources I Can Utilize?

Yes, there are several online resources available to help you better understand life insurance and the different types of policies available. Websites such as the Insurance Information Institute (III) and the National Association of Insurance Commissioners (NAIC) provide valuable information and resources related to life insurance.


Life insurance is an important part of financial planning and providing protection for your family. It is important to understand what life insurance covers and the different types of policies available, so you can choose the right policy for your needs.

We have explored what life insurance is, who needs it, the types of policies available and how to choose a policy. We have also discussed the application process, buying life insurance online and the claims process.

It’s important to do your research and find the best policy for you and your needs. Be aware of the common pitfalls, such as picking an inadequate policy, not reading the fine print or applying for the wrong policy.

If you have any questions about life insurance, please speak with an experienced insurance broker. They will help you select the best policy for your needs and provide you with additional information.

At the end of the day, life insurance is a critical part of your financial plan, and it’s important to make sure you are adequately covered. Take the time to research the different policies and choose the one that best meets your needs.

Discover How Much YOU Can Save on Life Insurance

Our customers save as much as 35% compared to traditional life insurance offers…

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Avatar photo About the author: David Krug is the CEO/President of PolicyPeak, a modern and tech-driven life insurance company. David noticed a gap in the market for personalized policies at an affordable price. He founded PolicyPeak in 2022 with the goal of simplifying the buying process for consumers and offering policies tailored to their unique needs.