Yes, life insurance does cover diabetes. However, it only pays upon the death of the insured person, it does not cover any health care costs.
Also, unless there is an exclusion in the life insurance policy that specifically excludes "diabetes", there should be coverage.
However, make sure you answer all questions truthfully when you apply for your life insurance policy.
There are some health questions which may pertain to diabetes, and you need to be honest about your health so the insurance company charges you the proper rate for your life insurance coverage.
Keep in mind, if you lie about a material fact on the life insurance application, and then you pass away within two years of getting the coverage, the insurance company can review the claim and deny coverage if they find you lied about your health and the health issue you lied about was the cause of your death.
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