How Does Life Insurance Work and What Does It Cover?

What does life insurance cover?

Life insurance policies offer these common features:²

Death benefit payout

A life insurance death benefit payout is usually a lump sum of money your beneficiaries receive after you pass away. They typically can use these funds in any way they’d like.

Cash value

Cash value comes with permanent life insurance policies such as whole and universal life insurance. This life insurance feature is essentially a tax-deferred savings account that grows over time.

Riders

Life insurance riders can allow you to access your death benefit while you’re still living in certain situations. You may use them to help cover expenses related to a terminal illness, hospice or nursing home care, or anything else. Aflac offers several riders that can be added to many life insurance policies, such as the accelerated-death benefit rider* and waiver of premium rider.

What deaths does life insurance cover?

Life insurance usually provides coverage for deaths that result from:

• Natural causes: Natural causes may be old age, a heart attack, stroke, or kidney failure.
• Accidental death: Examples of covered accidental deaths include car accidents and drowning.
• Suicide after two years: Suicide is typically covered as long as it occurred at least two years after the policy has been obtained.¹
• Murder: Murder is typically covered as long as it had nothing to do with your beneficiaries, and your death is considered homicide or manslaughter.

Expenses beneficiaries can help cover using the life insurance death benefits

Your beneficiaries can use the death benefit they receive from your life insurance policy to help cover the following:³

• End-of-life costs: End-of-life costs may be funeral or burial expenses, medical bills, and any other final expenses beneficiaries need to cover upon a policyholder’s death.
• Essential expenses: With a life insurance death benefit, your beneficiaries will have the funds to help cover everyday expenses like groceries and utilities.
• Debt: If you leave behind debt, like a mortgage or car loan, the death benefit payout may come in handy.
• Child and dependent care: The death benefit can assist with daycare, nanny care, and other related expenses your beneficiaries might incur after your passing.
• Charitable contributions:  You can name your favorite charity as a beneficiary and leave a legacy.

Reasons life insurance won’t pay out

Life insurance doesn’t typically pay out in these circumstances:⁴

• Murder: If your beneficiaries murder you or are closely tied to your murder, they won’t receive the death benefit, per the slayer rule.
• Suicide: A payout won’t apply if you commit suicide within the first two years of purchasing your policy.
• Acts of war and terrorism: Deaths that result from war or terrorism aren’t usually covered.

How quickly does life insurance pay out?

The amount of time life insurance pays out depends on your life insurance company. However, many providers pay out within 60 days of when beneficiaries file a death claim. Delays may occur if there’s a lapse in your policy, fraud is suspected, or your cause of death is excluded.⁵

Learn more about life insurance

Life insurance can make your loved ones' lives easier after you pass away by helping them cover expenses and pay off debts. Having a policy can help give you peace of mind knowing that they can be financially protected. If you’re interested in getting life insurance, Aflac offers a variety of  life insurance policies that are worth exploring. Start chatting with an agent to learn more about your options and get a quote today.