When it comes to life insurance policy, it is important to understand what is covered and what is not. Life insurance is designed to provide financial protection to your loved ones in case of your unexpected demise. It helps your family to cope with the financial burden that arises due to your absence. In this article, we will discuss in detail what is covered by your life insurance and how it can benefit you and your family.
What is life insurance?
Before we dive into what is covered by life insurance, let’s first understand what life insurance is. Life insurance is a contract between you and the insurance company in which you pay premiums, and in return, the insurance company pays a death benefit to your beneficiaries when you pass away. Life insurance policies come in different types and offer various benefits depending on your needs and goals.
Death benefit
The death benefit is the primary coverage provided by a life insurance policy. It is the amount of money that the insurance company pays to your beneficiaries when you pass away. The death benefit can be used by your beneficiaries to cover various expenses such as funeral costs, outstanding debts, living expenses, and future financial needs.
Accidental death and dismemberment (AD&D) coverage
AD&D coverage is an additional coverage that you can add to your life insurance policy. It provides a benefit if you die or are dismembered in an accident. AD&D coverage is typically inexpensive, and it can provide an extra layer of financial protection to your loved ones.
Terminal illness coverage
Terminal illness coverage is another type of coverage that is included in some life insurance policies. It provides a benefit if you are diagnosed with a terminal illness and have a life expectancy of 12 months or less. The benefit can be used to cover medical expenses, living expenses, and other costs associated with your illness.
Cash value
Some types of life insurance policies, such as whole life insurance and universal life insurance, have a cash value component. The cash value is the amount of money that accumulates over time as you pay premiums. You can borrow against the cash value or withdraw it, and it can also be used to pay your premiums.
Riders
Riders are additional coverages that you can add to your life insurance policy for an extra cost. Some common life insurance riders include:
- Waiver of premium rider
This rider waives your premiums if you become disabled and unable to work.
- Accelerated death benefit rider
This rider allows you to access a portion of your death benefit if you are diagnosed with a terminal illness.
- Long-term care rider
This rider provides a benefit if you require long-term care due to an illness or disability.
Exclusions
Like any insurance policy, life insurance policies also have exclusions. Some common exclusions include death due to suicide within the first two years of the policy and death due to a criminal act committed by the policyholder.
Conclusion
Life insurance provides financial protection to your loved ones in case of your unexpected demise. It covers various expenses such as funeral costs, outstanding debts, living expenses, and future financial needs. Understanding what is covered by your life insurance policy is essential to ensure that your loved ones are adequately protected in case of your unexpected demise. For calculating the premium you may use life insurance premium calculator.
FAQs
The primary coverage provided by a life insurance policy is the death benefit.
AD&D coverage is an additional coverage that provides a benefit if you die or are dismembered in an accident.
Terminal illness coverage is a type of coverage that provides a benefit if you are diagnosed with a terminal illness and have a life expectancy of 12 months or less.
The cash value is a component of some life insurance policies, such as whole life insurance and universal life insurance. It accumulates over time as you pay premiums, and it can be accessed through borrowing or withdrawal. This component can provide some flexibility and additional benefits to policyholders, but it also increases the overall cost of the policy
