What is Insurance Coverage?
Insurance coverage is the amount of financial protection a policyholder gets in the event of a covered loss. The insurance coverage stays in place as long as the policy owner meets the insurer’s requirements, which generally means paying the policy premiums on time.
Coverage amounts
When it comes to life insurance, coverage gets expressed as the policy’s face amount, also called the death benefit or face value. This is a lump sum of money (e.g., $500,000, $1,000,000) that the life insurance company will pay to specified individuals at a certain point.
Policy owners get to choose the coverage amount — or death benefit — they want the policy to provide when they apply for life insurance, up to a certain limit. The more coverage they choose, the more the policy will cost.
When coverage kicks in
Insurance coverage kicks in when the policyholder suffers a covered loss. In life insurance, that occurs when the insured — the person whose life the policy was insuring — dies. At that point, their beneficiaries get the death benefit.
Maintaining coverage
Most life insurance policies require the policy owner to continually make payments called premiums in order to maintain the insurance coverage. If the policy owner doesn’t make the payment on time and a specified grace period passes (usually, 30 days), the policy can lapse. At that point, the insurer isn’t responsible for maintaining insurance coverage. That means that if the insured dies, they aren’t required to pay out the death benefit.
