Most people think of life insurance as a safety net for their loved ones after they have gone. In fact, it can help during the policyholder’s lifetime. Life insurance with living benefits is a policy that goes beyond traditional coverage by offering access to funds in case of injury or illness. This life insurance with a twist may be the financial game changer you were unaware you needed.
What Are “Living Benefits” in a Life Insurance Policy?
Living benefits are an optional feature or rider attached to a life insurance policy that allows you to tap into the death benefit before passing away. These benefits, designed to help you financially while still alive, can be a lifeline in a severe health crisis. Generally, living benefits can apply in any of the following key situations:
- Chronic illness: Living benefits can provide financial support if you are diagnosed with a chronic illness that limits your ability to perform everyday activities. The type of illness could be anything from a serious heart condition to a debilitating neurological disorder.
- Critical illness: Cancer, stroke, heart attack, and many life-altering conditions fall into this category. If you are diagnosed with a critical illness, a life insurance policy with living benefits can help you pay for treatment and rehabilitation and help replace lost income. At the same time, you get back on your feet.
- Terminal illness: If you are diagnosed with a terminal illness and given a prognosis of a limited time to live, living benefits allow you to access the death benefit early. This can help ease the financial burden of medical bills, palliative care, and fulfilling last wishes.
Why Consider Living Benefits?
Healthcare costs are rising, and life can be unpredictable. Serious illnesses, injuries, and long-term medical conditions can drain your finances as well as your health. While traditional insurance may cover medical treatments, it often does not cover the non-medical costs of living with a serious illness, such as personal care services, home modifications, and lost income due to time away from work. This is when living benefits can make a difference. They can provide financial peace of mind with flexibility and support when the unexpected happens and help you manage a crisis without worrying about how to pay for it.
How Are Living Benefits Paid Out?
When a policyholder qualifies based on the terms of the policy, after a request and approval process, the insurer may distribute living benefits in any of the following ways:
- Lump sum payment: In many cases, the policyholder may access living benefits in a lump sum. This is particularly true in terminal illness cases when the policyholder may need immediate financial support.
- Installments: Depending on the policy and the severity of the illness, the payout may be structured in regular installments in some cases. This may be more common for chronic conditions that require long-term financial assistance.
- Policy loan or accelerated death benefit: Some policies offer the option of taking a loan against the death benefit (that must be repaid with interest) or accelerating a portion of the death benefit, thereby reducing the total amount available to beneficiaries after the policyholder’s death.
If you are considering life insurance with living benefits, our friendly agent can help you find a policy that suits your needs at the best available rates.