Many people who are thinking about taking out a life insurance policy for the very first time find themselves asking the same question: What does life insurance cover? Here at the aptly named Cuuver, we are here to explain what your policy will include and the importance of taking out life insurance.
What does life insurance cover?
Life insurance is intended to aid your loved ones if they can no longer rely on your income in the event of your death. The payout that comes from taking out a policy can be used to pay off a mortgage, clear any debts you may have, or just come in handy when it comes to covering everyday expenses, such as grocery shopping. They also go a long way to helping with funeral costs.
You can get life insurance cover in two primary forms: either term or whole life. A term life policy will cover you for a set period, such as 30 years, before expiring. If you die after the policy has expired, you will not have any coverage.
A whole life policy will pay out if you die at any time and you will pay the same premiums every month. While this is very beneficial, you should remember that if you live until you are 80, it is unlikely your family will suffer from a lost income as you will have probably retired.
Your life insurance policy will cover you for whatever amount you choose. If you have a family to support, many people opt to take out a policy which will equal about five years of their annual income. You can choose to take out a decreasing term life insurance policy, which is cheaper because the payout amount shrinks as you age.
It is important that life insurance does not cover all deaths. For example, a lot of insurers won’t pay out if you commit suicide, others will not pay out if you die straight after taking out the policy. Many policies do not cover you if you die during a terrorist attack or war. Similarly, if you die while engaging in an activity with a high-risk factor, such as an extreme sport, you may not be covered.
If you deliberately conceal a pre-existing illness, such as a terminal brain tumour, your insurer will probably refuse to pay a penny to your loved ones.
Browse life insurance policies with Cuuver, here.
This should not be constructed as advice and is guidance only.