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Life insurance companies pay out a death benefit to provide financial protection to your named beneficiary in cases of natural death, accidental death, suicide, or murder. In rare circumstances involving fraud or crime, your policy will not pay out.
Your beneficiaries can use the death benefit on any of their expenses, like a mortgage, college savings, or funeral expenses.
Life insurance pays out for death by natural causes, accident, suicide, and homicide
There are no restrictions to how or when beneficiaries spend the death benefit
In cases of fraud or criminal activity, the benefit may be withheld
What life insurance covers falls into two separate categories: the expenses the policy’s death benefit can be used on and the causes of death insured in your life insurance contract.
Your beneficiaries can spend your policy’s death benefit however they want. Beneficiaries often use the financial support for:
Everyday expenses: Like monthly bills, groceries, and other household essentials
Outstanding debts: Including a mortgage, credit card debt, private student loans, or auto loans
Child or dependent care: Replacing care provided by one spouse or programs like daycare
End-of-life expenses: Such as the cost of burial and funeral expenses or end-of-life medical care
College costs: To fund continuing education for your spouse or tuition for your children
When you shop for a policy, make sure that you buy enough coverage to account for your current and future expenses.
Standard life insurance policies cover almost all deaths, with a few potential exceptions. As long as your policy is still active at the time of your death, life insurance providers will pay out death claims due to:
Natural causes: For example, a heart attack, old age, or illnesses like cancer
Accidental death: Including accidental drug overdose
Suicide: After the policy’s suicide clause period ends
Homicide: Unless the beneficiary played a role in the murder
In some cases of severe illness you can access a portion of your life insurance funds before you die with policy add-ons called riders. You’ll need to have a qualifying condition, such as a terminal illness or a disability.
In cases of an expired policy, fraud, criminal activity, or certain other exclusions, your beneficiaries may not receive the death benefit.
Fraud: If you lie on your life insurance application, your provider can cancel your policy while you’re alive or deny or reduce the death claim after you pass away.
Criminal activity: If you die while committing a crime (or your beneficiary committed a crime to access your insurance money), your provider won’t pay out.
Exclusions: If you have a hazardous hobby, like skydiving, your provider may exclude it from your coverage, meaning the policy would not pay out if your death was skydiving-related.
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Beneficiaries must file a claim with the insurance company to receive the death benefit. Providers usually take a couple of weeks to process and pay out a claim. Your beneficiaries can choose to receive the payout as a lump sum or in monthly or annual installments.
The death benefit payout could be delayed if you die within the first two years of the policy (the contestability period). During this time your provider may review your application for misrepresentations before approving the claim. A review could delay payment up to 60 days.
Your state insurance department may also have a "timely payment of claims" clause that requires providers to pay out within a set period.
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Buying life insurance protects your loved ones from the worst-case scenario. As long as you’re honest on your application your policy will cover almost any cause of death, leaving your family with financial assistance for any of their present and future needs.
Life insurance pays out the death benefit to your beneficiaries for most causes of death. Illness, suicide, accidents, and death by natural causes are all covered by life insurance.
If you lied on your life insurance application, are murdered by your beneficiary, or die doing something that is excluded by your policy, your provider will not pay out.
Many insurers have exclusions for deaths that occur while committing a crime or during a dangerous activity, such as skydiving.
Beneficiaries can use life insurance funds any way they see fit. Many use the proceeds to pay off debts, cover funeral expenses, or for everyday expenses.
Amanda Shih is a life insurance editor at Policygenius in New York City. She has a passion for making complex topics relatable and understandable, and has been writing about insurance since 2017 with specialities in life insurance cost and policy types. She's previously written for Jetty and LegalZoom.
Rebecca Shoenthal is a life insurance editor at Policygenius in New York City, specializing in buying life insurance and the ins and outs of life insurance ownership. She's edited business books by the country’s top academics, politicians, journalists, thought leaders and CEOs, including venture capitalist John Doerr’s Measure What Matters, entrepreneur Scott Belsky's The Messy Middle, NYU Stern professor Scott Galloway's The Four, and technologist John Maeda's How to Speak Machine.
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