Know exactly what coverage your life insurance provides

By Compuquotes Team on March 26th, 2008

While life insurance can be very useful in case the unexpected occurs, many people who have life insurance might not know exactly what coverage their policies give. There are a number of different stipulations that can appear in life insurance policies, and if you aren't careful you might end up with a policy that will only pay out under certain conditions or that doesn't pay out as well as you had thought. This is why it's important to make sure that you understand exactly what coverage is provided by your life insurance policy, as well as any restrictions that your policy might have. Asking the right questions before you purchase your policy will ensure that you have all of the information that you need to be certain that your policy is the one that you want.

How much coverage is provided

One of the first things that you should ask about any life insurance policy is exactly how much coverage the policy provides. While this would seem self-explanatory, a number of life insurance policies will only pay their full potential amount under certain circumstances. Take the time to find out exactly how much coverage the policy provides minus any additional payouts for certain types of death. If a policy claims to pay out up to a certain amount, ask how much the average payout is instead of the maximum possible payout. While most life insurance will pay exactly what it claims, it's always important to ask just to make sure.

Do any coverage restrictions exist?

Another important question should be whether there are any coverage restrictions present in your life insurance policy. These restrictions might include the policy only paying out a portion of its worth under certain situations or the benefits of the policy only being available for certain beneficiaries. Try and find out if there is anything that might cause the policy to not provide its full coverage so that you'll know whether the life insurance provides the amount of coverage that you're looking for.

Are there any payout limitations?

Just as some policies might have coverage restrictions, it's also possible that there will be a payout restriction on your life insurance. These restrictions may include benefits being paid out as an annuity or other annual fund instead of a lump sum payment or your policy not being able to be paid out in the way that you would prefer. If you're wanting to have your life insurance used to set up a trust fund for your children, have your spouse receive the full benefit of your policy, or want it donated to a charity that you've worked for, make sure that your policy will be able to provide the funds in the way that you would like.

Are there beneficiary limitations?

While many life insurance companies will allow you to claim multiple beneficiaries, it may be possible that you're considering a policy that will only allow you to claim a single beneficiary. You might also encounter problems if your policy requires blood or marriage relation to any beneficiaries that you choose. Make sure that the life insurance policy that you decide on allows you to choose the beneficiaries that you want your policy to have.

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