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What Does Life Insurance Cover?

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Like all types of insurance, the answer to the question of what does life insurance cover is very specific. Life insurance covers the person who buys the policy. It provides a specific type of coverage, in which an insurance benefit is paid out to beneficiaries named by the insured. Therefore, although the insured is the answer to the question of who does life insurance cover, the insured himself is not usually the person who benefits most from the insurance.

What Does Life Insurance Cover

Most life insurance policies cover natural and accidental death if it occurs during the term of the policy. For example, if an insured purchases a twenty-year term policy and dies of any accidental or natural causes during that twenty-year period of time, the insurance policy pays the death benefit.

If the insured dies to a cause that is not covered in the policy, the insurance coverage does not kick in. For example, if someone kills himself or herself, generally no life insurance benefits are paid out.

A life insurance policy may not provide full coverage on the insured for a certain period of time after you sign up For example, if you buy a $200,000 policy, the full $200,000 death benefit may not be payable unless you have already been a customer for two years before you die. These provisions as far as when full coverage kicks in are explained in your insurance contract.

What are Life Insurance Benefits?

Life insurance benefits pay when a person dies of something that falls under life insurance cover as defined in the contract. Benefits consist of a death benefit. This is a cash payment to beneficiaries upon death. The size of the cash payment is determined by the size of the insurance policy. For example, if you buy a $5000 insurance policy, the life insurance has a $5000 benefit. If you buy a $500,000 policy, the death benefit is $500,000. The larger the policy, the more expensive the monthly premiums will be.

Life insurance benefits can pay out to any named beneficiary. You can also name multiple beneficiaries. For example, if you have a $100,000 life insurance policy, you can name each of your 4 grandchildren as a beneficiary and stipulate that they each get $25,000. Beneficiaries, who receive payment if you die of something that your life insurance cover includes, do not have to pay taxes on the death benefit in most cases.

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