Understanding what is excluded from your life insurance policy is crucial for ensuring your loved ones receive benefits. While life insurance can help cover many expenses, it doesn’t cover everything.
What does life insurance cover?
Life insurance covers the insured person’s life. Life insurance can help cover expenses such as funeral costs, medical bills, tuition, inheritance, and more. If you pass away while your policy is active, the beneficiaries can file a claim for their portion of the payout. This payout is called a death benefit.
What does life insurance not pay for?
There are numerous circumstances where your life insurance may not pay out.
- Policy Expiration: There are two main types of life insurance: term and whole life. With whole life the policy is active for your entire life. With term life, your coverage only lasts for several years. If you pass away after your term policy expires, your beneficiaries will not receive a death benefit.
- Policy Lapse: Your life insurance policy can lapse if you fail to pay the premiums. Your insurer may terminate your policy, leaving you without coverage.
- Outdated Application Information: You must keep your insurer updated on any significant life changes. These can include moving to a new area, getting married, or having children. Keeping this information up to date ensures there won’t be an unnecessary delay in the payout.
- Death From Illegal or Criminal Activity: If you pass away during an everyday activity, then your life insurance will likely pay as usual. However, your loved ones will not receive a payout if you pass away while committing a crime.
- Death From Suicide: Life insurance policies often have a suicide clause. This means that if the policyholder dies by suicide within a specified period from the start of the policy, then there will not be a payout.
- Death From Homicide: If the policyholder dies by homicide, then there will be an investigation to ensure that the beneficiaries are not at fault. Once this happens, the payout will occur as usual.
- Travel or living abroad: It is important that you disclose to your insurer if you move to another country or travel frequently. If you move to another country and need to update your insurer, your claim may be denied.
Let’s talk
To learn more about the ins and outs of life insurance, contact one of our experienced Avery Hall agents today at 302-316-6565 for Selbyville, 410-822-7300 for Easton, and 410-742-5111 for our Salisbury office.