Life insurance what does it cover

Insurers evaluate each life insurance applicant on a case-by-case basis, and with hundreds of insurers to choose from, almost anyone can find an affordable policy that at least partially meets their needs. In there were life insurance and annuity companies in the United States, according to the Insurance Information Institute. On top of that, many life insurance companies sell multiple types and sizes of policies, and some specialize in meeting specific needs, such as policies for people with chronic health conditions.

There are also brokers who specialize in life insurance and know what different companies offer. Applicants can work with a broker free of charge to find the insurance they need. This means that almost anyone can get some type of life insurance policy if they look hard enough and are willing to pay a high enough price or accept a perhaps less-than-ideal death benefit.

Insurance is not just for the healthy and wealthy, and because the insurance industry is much broader than many consumers realize, getting life insurance may be possible and affordable even if previous applications have been denied or quotes have been unaffordable.

In general, the younger and healthier you are, the easier it will be to qualify for life insurance, and the older and less healthy you are, the harder it will be.

Certain lifestyle choices, such as using tobacco or engaging in risky hobbies such as skydiving, also make it harder to qualify or lead to higher rates. Life insurance is most useful for people who need to provide security for a spouse, children, or other family members in the event of their death. Life insurance death benefits, depending on the policy amount, can help beneficiaries pay off a mortgage, cover college tuition, or help fund retirement.

Permanent life insurance also features a cash value component that builds over time. Life insurance is available to anyone, but the cost or premium level can vary greatly based on the risk level an individual presents based on factors like age, health, and lifestyle. Life insurance applications generally require the customer to provide medical records and medical history and submit to a medical exam.

Some types of life insurance such as guaranteed approval life don't require medical exams but generally have much higher premiums and involve an initial waiting period before taking effect and offering a death benefit. Life insurance policies all offer a death benefit in exchange for paying premiums to the insurance provider during the term of the policy. One popular type of life insurance—term life insurance— only lasts for a set amount of time, such as 10 or 20 years during which the policyholder needs to offset the financial impact of losing income.

Permanent life insurance also features a death benefit but lasts for the life of the policyholder as long as premiums are maintained and can include cash value that builds over time. Internal Revenue Service. Social Security Administration. Access Sept. Insurance Information Institute. Life Insurance. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.

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I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Life Insurance Basics. Term Life Insurance. Whole Life Insurance. Other Types of Life Insurance. Taxation on Life Insurance Policies. Insurance Life Insurance. What Is Life Insurance? Key Takeaways Life insurance is a legally binding contract that pays a death benefit to the policy owner when the insured dies. For a life insurance policy to remain in force, the policyholder must pay a single premium up front or pay regular premiums over time.

Term life insurance policies expire after a certain number of years. Permanent life insurance policies remain active until the insured dies, stops paying premiums, or surrenders the policy. A life insurance policy is only as good as the financial strength of the company that issues it. Disclosure We publish unbiased product reviews; our opinions are our own and are not influenced by payment we receive from our advertising partners.

Good to Know The policy owner and the insured are usually the same person, but sometimes they may be different. Who needs life insurance? What are the benefits of life insurance? Payouts are tax-free—death benefits are paid as a lump sum and are not subject to federal income tax because they are not considered income for beneficiaries.

If you die before that contract expires, your loved ones will receive a death benefit payout based on how much coverage you buy. You might also consider what kinds of expenses your loved ones will face, and what kind of legacy you wish to leave behind. With all that in mind, here are seven common expenses people buy life insurance to help cover:. An obvious use for a life insurance policy is to cover end-of-life financial obligations including funeral costs and burial expenses.

Grieving is hard enough. Think about what it costs to run your household, day in and day out. You may pay rent or have a mortgage. Now, consider how your spouse or partner would handle this heavy financial obligation if something were to happen to you.

A life insurance policy, however, could help your beneficiaries have a larger financial cushion for daily expenses. This lets you lift some of the financial burden off their shoulders so they can focus on getting themselves and your kids, if you have them, through the grieving process.

Knowing that life insurance proceeds can be put toward paying the mortgage can offer your partner the freedom to make decisions that are best for your family during a trying time. For example, should they stay in the house? Should they pay off the mortgage entirely? Does it make sense to downsize? Should they move closer to family? The ability to afford the monthly mortgage payment buys an immense amount of flexibility, time and peace of mind for your family. Your mortgage is likely your biggest debt, but it may not be your only one.

Credit cards, car loans, personal loans or student loans may also be lingering. Thankfully, federal student loans are forgiven when the borrower or the parent, in the case of Parent PLUS loans dies.

Cosigners are jointly responsible for the debts and having to make the payments alone could put a strain on their finances. If you want to help with the cost of college tuition, how much would you like to cover? How much do you want to add for burial expenses? How much savings do you have? If you already have life insurance, enter the total coverage amount. Enter total coverage amount of existing life insurance. The cost of life insurance varies significantly depending on several different factors.

One of the biggest cost factors will be the type of life insurance you buy. For example, a term life insurance policy is significantly less expensive than a whole life insurance policy for the same amount of coverage.

Here are some of the most common factors affecting life insurance rates :. At the same time, many consumers overestimate the cost. The only way to know what you will pay is to get life insurance quotes from a few companies. Quotes are free. An experienced life insurance agent will know what companies tend to give the best prices based on your age, health and desired coverage amount.

Expect to be asked about your age, health, tobacco use, your family health history, driving record, and any dangerous occupations or hobbies. When you have a quote that you like, you can start a formal application.

These exams can take place at your home, work or sometimes a local exam office. The time it takes to process an application varies significantly among companies and policy type.

You can name multiple beneficiaries and decide what percentage they each will receive when you die. Additionally, you should add contingent beneficiaries who will receive the death benefit if your primary beneficiaries have died.

Not everyone names people as beneficiaries. Some people name trusts. By creating a revocable living trust and naming it as the life insurance beneficiary, you can ensure that the money is used according to your wishes. For example, the trust money could be used to take care of children. If you decide to name a trust the beneficiary of your policy, make sure to work with an attorney to structure the trust correctly.

For example, life events such as a marriage or a divorce can impact your selection. To update your beneficiaries, contact your life insurer and submit a change of beneficiary form.

Claims can be paid quickly—in about a week, assuming the insurer has all the documents it needs. You only need to know the name of the insurance company and contact them to initiate the claim. And insurers are contractually obligated to pay only the people listed on the policy. Ashley is a personal finance writer and content creator. In addition to being a contributing writer at Forbes, she writes for solo entrepreneurs as well as for Fortune companies.

Edit location. Select a product to get a quote. Register new account Pay your bill. Get your ID cards. Get the protection you need and the peace of mind you deserve with Allstate insurance. Get a quote Find an agent. Permanent Life Insurance What Is Whole Life Insurance. Term Life Insurance This content is for informational purposes only and may not be applicable to all situations. This life insurance information is provided for general consumer educational purposes and is not intended to provide legal, tax or investment advice.

Life insurance also offered and issued by third party companies not affiliated with Allstate. Each company is solely responsible for the financial obligations accruing under the products it issues. Product guarantees are backed by the financial strength and claims-paying ability of the issuing company.