Introduction
We all know that term life insurance
is a great way to insure ourselves against the death of our spouse, children, or
parents. But how much do you know about what is not covered by term life
insurance?
Term life is the most popular form
of life insurance you can buy. It's easily underwritten, easy to buy, and has an
initial premium that's generally much lower than most other forms of life
insurance. You might have been told that term life insurance covers things like
your funeral expenses or the cost of a college education for your child in case
they lose their health or die unexpectedly. These are true statements — but
there are many things that are NOT covered by term life insurance!
Term
life insurance does not cover diseases or injuries.
Term life insurance does not cover
diseases or injuries. It's for people who have a limited time to live, and the
policy is designed to pay out the face value of the policy if you die within a
certain number of years from the date of purchase.
Term life insurance pays out a lump
sum when you die, but it's not necessarily guaranteed. There are some policies
that pay more in case of an early death, but these are usually called
"cash value" policies because they allow you to accumulate cash
values as you live longer.
Term life insurance also doesn't
help with college tuition or other expenses that may arise after your death.
It's important to know that term life insurance will never replace any other
obligation your loved ones might have toward you, such as funeral costs or
debts owed to credit card companies or banks.
Death
due to substance abuse is also not covered by term life insurance.
Death due to substance abuse is also
not covered by term life insurance. It can be a very costly way to end your
life, but it does not count toward the term limit of your policy.
Term life insurance policies cover
you for a fixed period of time, usually between 10 and 20 years. As long as you
remain insured, the coverage will continue at the same level until you die or
until the coverage expires.
How much is term life insurance?
The cost of a term life insurance
policy depends on several factors, including how old you are when you buy it and
where you live. You can expect to pay about $50 per month for a 20-year term
policy with an annual premium of $1,000.
Term
life insurance doesn't cover the cost of a funeral.
Term life insurance doesn't cover
the cost of a funeral.
The policy is designed to pay out if
you die before your term expires. That's it.
If you've been thinking about buying
term life insurance, consider this: Term policies typically come with a maximum
payout of $50,000 while whole-life policies can pay out as much as $1 million
or more. And that's only if you have a high-risk occupation or are in poor
health or both.
While whole-life policies typically
qualify for higher rates and higher cash values, they do have some drawbacks.
They're expensive — usually starting at around 4% of assets and going up from
there — and they take more paperwork than term policies.
While term life insurance doesn't
cover the cost of a funeral, it does provide coverage for living expenses in
the event of your death. This can include burial or cremation, as well as
medical and hospital expenses. Other expenses that may be covered include
funeral expenses, debt payments, and other debts and unpaid bills.
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