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What Does Life Insurance Cover?

What Does Life Insurance Cover

Business & Finance

What Does Life Insurance Cover?

What Does Life Insurance Cover?

Life insurance policies have one purpose: to offer financial protection to your loved ones once you are gone or you are no longer capable of providing financial security due to terminal illness or accidents that cause permanent disability. However, death occurs differently and different life insurance policies offer varying durations and types of coverage. Here are factors that help you understand what your life insurance policy covers.

1. Duration

There are two main types of life insurance plans: whole life insurance and term life insurance. 

Whole life insurance offers coverage until death occurs while term life offers coverage for a predetermined period. Term life insurance is ideal for people who believe that their dependents may require coverage to replace their income after they have retired. On the other hand, whole life insurance is ideal for people looking to build cash value and adequate monetary compensation for their loved ones upon their demise. 

2. Policy Amount

Life insurance offers life coverage based on the amount you prefer; the insurance provider does not dictate the value of your life insurance cover.  However, most people take out a life coverage amount equivalent to 15 to 20 times of their annual income. But, not all policies offer a flat coverage amount. For instance, the amount insured under decreasing term life insurance reduces as you age. Universal whole life insurance invests premiums and adjusts your death benefits based on how the investments perform.

3. Policy Exclusions

As aforementioned, life insurance policies do not cover all types of death. For example, if an insured commits suicide, insurance providers may not offer compensation. Other life insurance providers will not offer compensation if you die right after taking out the policy while others will refund paid premiums only. 

Additionally, life insurance does not cover death that occurs during wars, acts of terrorism, or due to performing risky activities and sports. If your insurance provider establishes that you concealed a pre-existing health condition like cancer, your family will not be compensated.

4. Policy riders

You are allowed to add policy riders that offer additional coverage at an extra cost. For instance, a double indemnity clause will offer double the policy value if death is caused by an accident. Other policy riders offer compensation if you develop a terminal illness or become permanently disabled.

Best Life Insurance Plans

Life insurance offers peace of mind from knowing that your family will enjoy financial security once you are gone. However, this only happens if you choose the best life insurance plan that not only caters to your insurance needs but is also affordable. The best life insurance cover is not always the cheapest but one that offers adequate financial support. 

How do you choose the best life insurance plans?

1. Determine your needs

Your life insurance needs are determined by the financial value you wish to leave behind and the amount of money your dependents require to survive after you are gone

Also, personal factors like age may determine the type of plan you choose. For example, if you are above 50 years, you may opt for term life insurance as opposed to whole life insurance because you will require coverage for a short time. 

A universal life insurance offers ready cash to cater for unprecedented financial difficulties like huge business losses and still maintains a substantial death benefits package. In addition, whole life insurance is ideal for people who prefer lifetime coverage in order to enjoy tax-deferred savings.

2. Determine the cost of life insurance

It is advisable to take out a life insurance plan that you can afford. This is because failure to pay premium regularly can reduce the amount of compensation your beneficiaries receive or render the insurance policy obsolete due to a breach of contract. 

Insurance providers consider how risky you are to insure before determining your premium amount. The level of risk is determined by your family’s medical history and your lifestyle. If you are in good health and lead a low-risk lifestyle by not smoking, you are bound to pay lower premiums. 

Also, premium charges vary based on the plan you choose. For instance, term life may charge the same premium amounts for the entire term duration or subject the premium charges to annual renewable ones where the premiums increase as you age.

How to Compare Deals Online?

With the above information, comparing life insurance offers online should be easy because you already know what you are looking for. Though life insurance companies have an online presence, it is advisable to compare life insurance deals on comparison portals like that offer quotes from different insurance providers as well as information on advantages offered by different plans.

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