What Does Life Insurance Cover?

Life insurance covers death-related expenses such as funeral costs, outstanding debts, daily living expenses, and income replacement for beneficiaries.

Find out if you're overpaying for life insurance below.

By Mark Fitzpatrick

Reviewed by Mandy Sleight

Edited by Rae Osborn

Updated: May 20, 2025

Advertising & Editorial Disclosure

Key Takeaways

Life insurance pays out a tax-free death benefit to beneficiaries after the policyholder’s death. This money can be used for funeral costs, daily expenses, debt repayment and more.

Most policies cover death from illness, accidents, and natural causes. However, coverage may be limited during a waiting period or due to specific exclusions.

Exclusions vary by policy and may include suicide (within two years), fraud, or risky activities. Always review your policy terms to understand what’s not covered.

What Does a Life Insurance Policy Cover?

Life insurance provides coverage for the insured individual's life. Suppose you pass while your policy is in effect; in that case, your beneficiaries receive a payout that they can apply to various expenses of their choosing — such as medical bills, funeral expenses, education costs, loan repayments, daily expenses or even to boost their savings.

Life insurance coverage extends to various types of death, including natural death and accidents. However, certain circumstances like suicide within a specified period or involvement in a criminal activity might lead to a policy not paying out.

Understanding what life insurance covers, what types of death scenarios result in a death benefit and which do not can help ensure your loved ones have support when they need it most.

Expenses That Can Be Covered With the Life Insurance Payout

A life insurance policy can cover various expenses, providing significant financial support to your dependents upon your passing. Here are some key examples of personal uses of life insurance:

1
Funeral Expenses
Life insurance can help cover these costs, easing the financial burden during an already difficult time. If covering these expenses is your primary concern, then you may want to consider a final expense policy. The costs associated with a funeral can be quite substantial, including:
- Funeral service costs
- Burial or cremation costs
- Headstone or urn costs
2
Living Expenses
Life insurance can help with your dependents' daily living expenses, such as:
- Groceries and other food costs
- Utility bills, such as electricity, water and gas
- Rent or mortgage payments
- Transportation costs, including car maintenance, fuel or public transit
- Health insurance premiums and out-of-pocket health care costs
- Clothing and personal care expenses
3
Debts
Life insurance can be instrumental in settling any outstanding debts that you may leave behind, such as:
- Mortgage loans
- Car loans
- Credit card debts
- Personal loans
- Student loans
4
Education Expenses
The payout from a life insurance policy can be allocated to fund your children's or other dependents' education. This can cover a variety of educational costs, such as:
- Private school tuition for younger children
- University tuition, books and living expenses for older dependents
- Post-graduate or vocational training programs
5
Lost Income
If you were a primary income earner, life insurance can replace that lost income, helping to maintain your family’s standard of living after your death.
6
Medical Expenses
If you incurred significant medical expenses before your death, your life insurance could be used to cover these costs, easing the burden on your loved ones.
7
Child Care and Related Expenses
For families with young children, life insurance can cover child care costs, such as:
- Daycare or babysitter expenses
- After-school programs or activities
- Education-related costs, such as tutoring
8
Donations to Charities
You can designate a portion or all of your life insurance payout to a charity of your choice, ensuring your philanthropic legacy continues even after your death.
9
Estate Taxes
In some cases, life insurance proceeds can help pay estate taxes, protecting the value of your estate for your heirs.

Types of Deaths Covered by Life Insurance

Life insurance policies are generally designed to provide financial protection against the broadest range of circumstances surrounding the policyholder's death. The specifics of what is covered can vary between different insurers and policies, but most life insurance policies will cover:

Type of Death	Description
Natural Causes	Generally, life insurance covers natural death. If the policyholder dies due to natural causes, such as illnesses or diseases like cancer, heart disease or complications from diabetes, the life insurance policy will typically pay out. This is subject to the condition that the policyholder was honest about their health history when applying for the policy.
Accidents	Deaths resulting from accidents, such as car accidents, accidental falls or any other unintentional injury, are usually covered by life insurance policies. This even includes accidents that might occur while participating in high-risk activities unless specifically excluded in the policy.
Homicide	If the policyholder is murdered, the life insurance policy generally pays out to the beneficiaries. However, if the beneficiary is found to be involved in the murder, the "slayer rule" typically prevents them from receiving the death benefit.
Pandemic Illness	Most life insurance policies will cover death due to pandemic illnesses, such as COVID-19, provided the policy was in effect prior to the illness.
Suicide	Many life insurance policies include a clause stating that the policy will not pay out if the policyholder commits suicide within a specified period after the policy is issued (usually two years). But, generally, life insurance covers suicide after this initial period has passed.
Death in a Foreign Country	If a policyholder dies while in a foreign country, the death benefit will usually still be paid out, provided that the policyholder's travel to that location did not violate any policy terms.

Carefully review your policy documents or consult with your insurance provider to understand the specific terms and conditions of coverage. This ensures that you and your loved ones know what types of death are covered by life insurance.

What Does Life Insurance Not Cover?

Certain circumstances might result in a life insurance policy not paying out. These usually include:

Suicide

Many life insurance policies include a clause stating if the policyholder commits suicide within a specified period after the policy is issued (usually two years), the policy will not pay out.

Fraud or Misrepresentation

If a policyholder lies or withholds material information on their insurance application, the insurer can deny the claim.

Policy Expiration or Lapse

If the policyholder dies after their term life policy has expired, or if the policyholder allowed the policy to lapse by not paying the premiums, the policy will not pay out.

Exclusions

Some policies have specific exclusions, such as deaths due to dangerous activities or in specific locations. Always review your policy to understand what is and is not covered.

Involvement in Criminal Activity

If a policyholder's death occurs due to criminal activity, it may result in the policy not paying out. Importantly, if the beneficiary is found to have been involved in the homicide of the policyholder, the "slayer rule" typically prevents them from receiving the death benefit. This rule exists to deter beneficiaries from causing harm to the policyholder.

To ensure that you and your loved ones fully benefit from the coverage of life insurance, it's essential to understand the possible uses for life insurance and remain compliant with the terms laid out in your policy. Maintaining honesty in your application and adherence to policy rules can safeguard the financial security that life insurance with death benefit aims to provide.

How to Ensure Your Death Benefit is Paid

Ensuring your loved ones benefit from the financial protection of a life insurance policy requires proactive steps. These measures safeguard the policy's integrity and affirm your commitment to your beneficiaries' future well-being. Adhering to best practices can significantly increase the likelihood of a seamless and dispute-free claim process.

1
Avoid Policy Lapse
Ensure that you pay your premiums on time. If you want to be extra safe, set up autopay with your insurance company. If you're having difficulty with the payment amounts, reach out to your insurance company to discuss options.
They may be able to adjust your payment schedule or provide a grace period. Some policies have a premium waiver benefit in case of disability, which could keep your coverage in force without payments if you become disabled.
2
Honesty on the Application
Be as truthful and accurate as possible when filling out your insurance application. If an insurer discovers that you were dishonest about your health or lifestyle (e.g., smoking, alcohol consumption, risky hobbies), they may deny a claim or cancel your policy.
3
Understand Your Policy's Terms
Make sure you fully understand your policy's terms, including any exclusions or conditions. For instance, some policies have specific exclusions for high-risk activities such as skydiving or travel to certain countries. If you're unsure about any aspect of your policy, consult with your insurance agent or a legal advisor.
4
Timely Application
Apply for life insurance when you're relatively young and in good health. If your health deteriorates and you then apply for life insurance, the insurer might reject your application, or you might die before the policy takes effect.
5
Suicide Clause
In most cases, life insurance covers suicide. However, most insurance policies have a suicide clause, which typically states that no death benefit will be paid if the policyholder's death results from suicide within the first two years of the policy. Seek professional help if you're dealing with depression or suicidal thoughts.
6
Consider a Policy with Fewer Restrictions
If you participate in high-risk activities or have health issues, consider a life insurance policy with fewer restrictions, such as a guaranteed issue life insurance policy. These policies often have higher premiums but can assure that your beneficiaries will receive a payout, illustrating one of the many life insurance uses.

Life Insurance Coverage Explained: Bottom Line

A life insurance policy provides financial protection by covering death due to illness, accidents, and natural causes. It helps your loved ones manage funeral expenses, debts, and ongoing living costs. However, understanding what’s excluded — such as certain high-risk activities or early suicide — is just as important. Always review the fine print to ensure your policy aligns with your family’s needs and expectations.

Understanding Life Insurance Coverage: FAQ

Understanding what life insurance covers can help ensure you're fully prepared for the future. Here, we address some frequently asked questions, offering insights into the comprehensive scope of coverage provided by life insurance policies.

Whose life is covered on a life insurance policy?

The life insurance policy covers the policyholder’s life. The policy specifies the insured individual and the beneficiaries who will receive the death benefit.

What types of expenses can your life insurance beneficiary pay for with the benefit?

Life insurance can cover a wide range of expenses like funeral expenses, living expenses, outstanding debts, educational costs for dependents, lost income, medical expenses, child care and related expenses. It can also cover donations to charities and estate taxes.

Does life insurance cover medical bills?

While life insurance provides a death benefit to beneficiaries, it can (through the estate) indirectly support the payment of the policyholder’s outstanding medical bills.

What does life insurance cover?

Life insurance typically covers deaths due to natural causes, accidents, homicide, pandemic illnesses, suicide (after a certain period specified in the policy) and death in a foreign country. A life insurance policy generally pays benefits if an individual dies during the period in which the policy is covered. Check your specific policy or consult your insurance provider for details.

Does life insurance cover suicide?

Most policies include a clause where life insurance covers suicide only after a certain period, typically two years, to deter fraudulent claims. After this period, life insurance policies generally extend coverage to include death by suicide, ensuring beneficiaries are supported.

Does life insurance cover natural death?

Life insurance covers natural death, ensuring beneficiaries receive financial support for losses due to illnesses or age-related causes.

Does life insurance cover accidental death?

Yes, accidental deaths, including unforeseen events and injuries, are generally covered under a life insurance death policy.

Does life insurance cover murder?

Life insurance policies usually cover death by homicide, offering financial protection to beneficiaries unless the beneficiary is proven to be involved in the murder.

Does life insurance cover car accidents?

As unexpected and accidental car accidents are typically covered under life insurance policies, offering compensation to beneficiaries.

Under what circumstances might life insurance not pay out?

Life insurance may not pay out in the event of suicide within a specified period after the policy is issued, if the policyholder commits fraud or misrepresentation on their insurance application, if the policy has expired or lapsed or if the death falls under any specific exclusions outlined in the policy.

How can I ensure that my life insurance death benefit is paid out?

To ensure your life insurance benefit is paid out, it's important to pay premiums on time to avoid policy lapse, be honest on your application, understand your policy's terms (including any exclusions) and apply for life insurance when you're in relatively good health. It's also worth noting the suicide clause in most policies.

Can life insurance proceeds be donated to charities?

Yes, you can designate a portion or all of your life insurance payout to a charity of your choice.

What does life insurance not cover?

Standard exclusions in life insurance policies often include death from suicide within the first two years of the policy and deaths due to illegal activities or certain high-risk hobbies.

What voids a life insurance policy?

Fraud, such as lying about health or lifestyle on the application, non-payment of premiums and violating travel or activity clauses can void a life insurance policy.

How does life insurance reduce financial loss upon the insured's death?

Life insurance policies will normally pay for losses arising from the insured's death, providing beneficiaries with a payout that can cover debts, funeral costs and living expenses. This financial support can help reduce the economic impact on the family, ensuring that they maintain their standard of living and meet financial obligations without the primary income earner.

Best Life Insurance Coverage: Our Review Methodology

Why Trust MoneyGeek? We analyzed 1,488 life insurance quotes alongside customer satisfaction, financial stability reports, product offerings and more to determine the best life insurance companies.

MoneyGeek created a scoring system to compare life insurance companies across five categories and ranked them based on their scores. We chose to review these companies based on their broad national coverage and ability to provide an online quote.

MoneyGeek’s Scoring System

In our unique scoring system, companies can earn up to five points in each of five categories. We then use these category scores to calculate an overall MoneyGeek score out of 100. We applied the following weightings to score insurers:

Affordability: 30%
Financial Stability: 25%
Buying Process: 20%
Customer Satisfaction: 15%
Product Diversity: 10%

Each company’s score incorporates:

Cost data obtained through online quotes
Financial strength ratings from AM Best and number of years in business
Customer satisfaction data from the National Association of Insurance Commissioners (NAIC) customer complaint index (we reviewed annual complaint data from 2020 to 2022, the most recent year available)
Availability of tools to aid in the buying process, such as online product materials and multiple payment options
Diversity of life insurance products offered

Sample Customer Profile

MoneyGeek used a standard profile to obtain life insurance quotes:

40-year-old male
Non-smoker
5 feet 11 inches tall and 175 pounds
Excellent health rating

Premiums are based on the standard profile unless otherwise noted.

We modified the profile by age, gender, height, weight, tobacco use, health rating and geographic location to collect a variety of quotes and determine the best life insurance company for several types of customers. We collected quotes for term life insurance with varying term lengths and coverage amounts as well.

We identified trends in the data set and used those patterns to calculate projections and extend the data beyond what was originally collected.

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About Mark Fitzpatrick

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.

Read Full Bio »

What Does Life Insurance Cover?

Key Takeaways

What Does a Life Insurance Policy Cover?

Expenses That Can Be Covered With the Life Insurance Payout

Funeral Expenses

Living Expenses

Debts

Education Expenses

Lost Income

Medical Expenses

Child Care and Related Expenses

Donations to Charities

Estate Taxes

Types of Deaths Covered by Life Insurance

What Does Life Insurance Not Cover?

Suicide

Fraud or Misrepresentation

Policy Expiration or Lapse

Exclusions

Involvement in Criminal Activity

How to Ensure Your Death Benefit is Paid

Avoid Policy Lapse

Honesty on the Application

Understand Your Policy's Terms

Timely Application

Suicide Clause

Consider a Policy with Fewer Restrictions

Life Insurance Coverage Explained: Bottom Line

Compare Life Insurance Rates

Understanding Life Insurance Coverage: FAQ

Whose life is covered on a life insurance policy?

What types of expenses can your life insurance beneficiary pay for with the benefit?

Does life insurance cover medical bills?

What does life insurance cover?

Does life insurance cover suicide?

Does life insurance cover natural death?

Does life insurance cover accidental death?

Does life insurance cover murder?

Does life insurance cover car accidents?

Under what circumstances might life insurance not pay out?

How can I ensure that my life insurance death benefit is paid out?

Can life insurance proceeds be donated to charities?

What does life insurance not cover?

What voids a life insurance policy?

How does life insurance reduce financial loss upon the insured's death?

Best Life Insurance Coverage: Our Review Methodology

Life Insurance Policy Coverage: Related Articles