Life Insurance with Living Benefits:
More Than Just a Death Payout

When you think of life insurance, you probably picture financial support for your loved ones after you're gone. That's accurate for the primary purpose. Many options also give access to life insurance with living benefits.

These policies offer features that can provide significant financial assistance while you are still alive.
let's take explore how these benefits can be a crucial safety net, helping you navigate challenging circumstances and offering peace of mind during your lifetime.

What Are Living Benefits?

Living benefits are provisions within a life insurance policy (often added as riders or built into permanent policies) that allow you to access a portion of your policy's death benefit, or other financial resources, under specific conditions while you are still alive. This means you can use these funds to cover expenses, manage medical crises, or even supplement your income when faced with an unexpected health event or need.

How Do Living Benefits Work?

The way living benefits work depends on the type of policy and the specific rider or feature. Generally, when a qualifying event occurs, you can file a claim with your insurance company to access a portion of your policy's death benefit. The amount you receive will typically be deducted from the payout your beneficiaries would receive after your passing.

It's important to understand that the funds received from living benefits are often flexible and can be used for various purposes, not just medical bills. This flexibility can be incredibly valuable during difficult times.

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Common Types of Living Benefits:

Here are some of the most common life insurance with living benefits you might find in a policy:

Accelerated Death Benefit (ADB) Riders: These are among the most prevalent living benefits. An ADB rider allows you to access a portion of your death benefit if you are diagnosed with a qualifying terminal, chronic, or critical illness.
Terminal Illness Rider: If you receive a diagnosis with a limited life expectancy (6, 12, or 24 months, depending on the policy), this rider allows you to receive a significant portion of your death benefit early. These funds can be used for medical care, hospice, or to simply enjoy your remaining time without financial stress.
Chronic Illness Rider: This benefit provides access to funds if you are diagnosed with a chronic illness that prevents you from performing a certain number of Activities of Daily Living (ADLs), such as bathing, dressing, eating, continence, toileting, or transferring. These funds can help cover long-term care expenses, home health care, or other related costs.
Critical Illness Rider: This rider offers a payout if you are diagnosed with a specific critical illness, such as a heart attack, stroke, cancer, or kidney failure. The funds can help cover medical treatments, lost income, or other expenses associated with the illness.

Cash Value (in Permanent Life Insurance): Permanent life insurance policies (like Whole Life or Universal Life) build cash value over time. Dive deeper into how this cash value of life insurance grows on a tax-deferred basis here, and can be accessed in several ways while you're alive:
Withdrawals: You can withdraw a portion of your accumulated cash value. This can reduce your policy's death benefit and may be taxable if the withdrawal exceeds your premiums paid.
Policy Loans: You can borrow against your policy's cash value. These loans typically don't require a credit check and can be a flexible source of funds. Interest accrues on the loan, and any outstanding loan balance will reduce the death benefit paid to your beneficiaries.
Using Cash Value to Pay Premiums: In some cases, you can use the cash value to cover your premium payments, potentially allowing you to stop paying out-of-pocket for a period.
Policy Surrender: You can surrender (cancel) your policy and receive the cash surrender value, minus any fees or outstanding loans. This will terminate your coverage.

Waiver of Premium Rider: This rider ensures that your life insurance premiums are waived if you become totally disabled and unable to work for a specified period (six months). This prevents your policy from lapsing during a time when you may be facing significant financial strain.

Long-Term Care (LTC) Rider: Some life insurance policies offer an LTC rider, which can provide funds to cover the costs of long-term care services if you become unable to care for yourself due to a chronic illness or cognitive impairment. This can be a valuable alternative or supplement to traditional long-term care insurance.

Return of Premium Rider (for Term Life): While not directly tied to health conditions, this rider, typically found with term life insurance, can be considered a "living benefit" because it returns all or a portion of the premiums you paid if you outlive the term of your policy.

Why Are Living Benefits Important?

Living benefits offer several crucial advantages:

Financial Flexibility: They provide a source of funds to help you manage unforeseen financial burdens during your lifetime, whether due to illness, disability, or long-term care needs.
Peace of Mind: Knowing you have access to these funds can reduce stress and allow you to focus on your health and well-being.
Protecting Your Savings: Instead of depleting your retirement savings or other assets to cover medical or care costs, living benefits can help preserve your financial future.
Covering Unforeseen Expenses: From medical bills and home modifications to lost income and end-of-life care, living benefits can help bridge financial gaps.

Considerations Before Opting for Living Benefits:

While living benefits offer significant advantages, it's important to be aware of some considerations:

Impact on Death Benefit: Accessing living benefits will reduce the death benefit paid to your beneficiaries.
Cost: Some riders may come with an additional premium cost, while others might be included at no extra charge but incur a fee if exercised.
Qualifying Conditions: Each living benefit has specific criteria and qualifying conditions that must be met to access the funds.
Tax Implications: The taxability of living benefits can vary. It's advisable to consult with a tax advisor to understand the potential tax implications for your specific situation.
Eligibility for Public Assistance: Receiving accelerated benefits may affect your eligibility for certain public assistance programs (Medicaid).

Is Life Insurance with Living Benefits Right for You?

Life insurance with living benefits can be a powerful tool for comprehensive financial planning. It offers protection not only for your loved ones after you're gone but also for your own financial well-being during challenging times.
When considering a policy, let's setup a time to discuss the available living benefit riders and cash value options with a qualified life insurance professional. We can help you understand how these features align with your individual needs, financial goals, and long-term planning.

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Life Insurance with Living Benefits: More Than Just a Death Payout