Does Term Life Insurance Cover Natural Death?

July 14, 2022

Taking out a mortgage is scary business. Suddenly you owe hundreds of thousands of dollars. If you are the main breadwinner in the family and you die what would happen? Who would help your loved ones cover the mortgage? Would they lose the home? Luckily, there are ways for you to protect them. One such way is with term life insurance.

Term life insurance covers the insured for a specific term, as the name suggests. Once the term is over, though, the insurance has no value. If the insured dies within the term, however, the beneficiaries of the policy receive the proceeds of the insurance.

The main question many people have is what type of death is covered? Does it have to be sudden and unexpected? Or can a death be due to natural causes and still be covered?

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What Term Life Insurance Covers

Term life insurance covers any type of death as long as it is not considered a breach of contract. If you lie on your application and the insurance company figures it out, your beneficiaries would be left with nothing.

The only caveat to most term life insurance policies is suicide. If a person commits suicide within the first 2 years of the policy, the insurance becomes null and void. However, most policies do provide coverage for even this instance after the first 2 years.

Dying of natural causes is one of the easiest ways to get an insurance payout fast. There is nothing for the insurance company to investigate. They don’t need to determine if you lied on the application or if you hid any facts from them that could have helped them determine if they should insure you.

As long as you disclose any illnesses or pre-existing conditions, you have before you take the insurance, your beneficiaries should receive ample coverage.

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How Much Life Insurance Do You Need?

The bigger question is often, how much life insurance do you need? How do you make sure your loved ones are well cared for? While there are many ‘rules of thumb’ that people use, the most common is as follows.

  • Take your annual salary and multiply it by 10. This assumes that you want to provide 10 years of protection for your loved ones. If you want more or less, adjust the multiplier accordingly.
  • After you have this number, add your obligations, including the mortgage. Include in the obligations any future plans, such as paying for college or a wedding for your child(ren).
  • If you have any substantial assets, you can subtract that amount from the above total. This will give you a good ballpark estimate of the amount of term life insurance you need.

If you are strictly worried about paying off the mortgage, knowing that your loved ones can handle the other obligations in life, you can focus strictly on your mortgage amount. This can help you save money on premiums.

Purchase Early

Typically, the earlier you purchase term life insurance, the cheaper it is for you. The older you get and the more health issues that become a part of your record, the more you will pay for premiums. Insurance companies base your premiums on the likelihood of a payout in the near future. The older you are, the sooner the life insurance company would have to pay out. The same is true if you have certain illnesses that could cut your life expectancy short.

Term life insurance is a great way to protect your loved ones in the event of your death. Natural causes of death are certainly covered under most insurance policies as are many other causes as long as you are honest with your insurance company. Do the right thing and protect your loved ones so that they can move forward without financial strain in your absence.

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