What Will Term Life Insurance Pay For?

by | Jan 16, 2023 | Billsaver, Term Life Insurance

When you go to sign up for life insurance, it is logical to wonder what all it covers. What will term life insurance pay for? Burial costs? Car payments? Family income? What can I use term life insurance for? These are all questions that you need to go through before you decide if term life is right for you. The information below highlights both the situations term life insurance covers as well as the types of expenses it can be used for. This will hopefully let you make the right decision.

Situations Term Life Insurance Covers

There are different types of term life insurance, and some offer more coverage than others. Some life insurance policies only cover accidental death, like if you die in a fire or in a car crash. These policies will not cover death as a result of a longstanding medical condition, such as cancer or AIDS. Accidental death policies are usually the cheapest ones you can get because they are so limited in the situations they pay for. Ideally, you need to look for something with a little more protection.

Traditional term life insurance policies will cover all forms of death, whether they are accidental or medical. They will not cover suicide for the first two years you have the policy, mainly to make sure you didn’t get the policy just so you can commit suicide. Some life insurance companies will not cover death in military combat because of a “no war” clause in their policies. If you are in the military, you will need to make sure that you do not work with a company like this to protect yourself while you are deployed. For those outside of the military though, any standard policy should be sufficient to cover their passing, regardless of the circumstances surrounding it.

Expenses Term Life Insurance Covers

Term life insurance can essentially be used to cover anything you want, or in this case, anything your family wants after you pass away. Here are some common items that people use life insurance money for:

  • Burial costs: This also applies to the cost of cremation. Your family can use your life insurance policy to make sure you are laid to rest properly. The average funeral costs thousands of dollars to complete, and even a simple memorial service can be expensive. That is the primary reason why people get life insurance; they do not want their families burdened by the debt.
  • Mortgage payments: If you want your family to live in the same home after you’re gone, you can ask them to use your life insurance policy to pay off the mortgage. Of course, you will need to make sure the policy is large enough to cover that cost. With some insurance companies, you can actually allot a certain portion of your insurance to go toward the bank with your home. That way your family doesn’t have to mess with it.
  • Income replacement: If you are the primary breadwinner for your home, your family may be in trouble once you die. A good life insurance policy can supplement their income for a while until they make other arrangements, or it may even carry them through the rest of their lives. It all depends on how high of a policy you decide to get.
  • College tuition: You can allot a portion of the insurance money to go towards your child’s education. This is somewhat like a trust fund, but it can only be applied to college. Consider it a scholarship that you set up for your kid. He or she will certainly appreciate it.
  • Outstanding debts: If you have any debts that will not be covered when you pass, life insurance can be used for those. This may be in the form of a car payment for a vehicle your spouse drives or an unpaid loan with your business as collateral. Your personal debts will go away, but those tied to other people will not. You can make sure they have nothing to worry about.

As you can see, you can do just about anything with a term life insurance policy. It’s surprising how few people maintain them nowadays. Rather than letting all the bills above become someone else’s problem, take action and make sure they are covered. What will term life insurance pay for? Anything you want it to. You just have to have the right policy for the job.