11 Living Benefits of Life Insurance

When a term life insurance policy is activated, beneficiaries receive death benefits, but did you know that there are many life insurance policies that offer benefits while you’re living, too? Read on to find out how accelerated benefit riders are designed to offer immediate financial relief in instances of critical illness or long-term care.

Defining Accelerated Benefit Life Insurance Riders

In instances of terminal illness, long-term care, and nursing home extended care, policy holders may be able to get living benefits to help pay for extended hospital stays, medicine, medical bills, and more. These extended benefits are known as accelerated benefit life insurance, and are available through separate riders that are purchased attached to permanent life insurance policies and more recently some term life policies.

Term life insurance plans are typically designed to offer death benefits only. However, if a policy holder has purchased a rider with your term life plan, they may receive cash payments while living if they are in need of long-term care, critically ill, or are chronically ill.

Whole life insurance gives policy holders more living benefits which can be used at any time. While they also offer the same death benefits as a term life plan, they also have a tax-deferred cash value that works the same way as a savings account.

There are available no-cost riders that offer living benefits, which are simply paid up front with the original policy claim. These riders often see a reduced payout amount of total benefits, since mortality rates are taken into consideration.

With an accelerated benefit, qualifying policy holders may receive their benefits in either a lump-sum or through periodic payments. Often, the remaining cash value of the death benefits is left in place.

Types of Living Benefit Riders

Besides the benefits offered by term life and whole life policies, the majority of riders for living benefits are based on the following immediate needs:

Critical Illness

For policy holders that have been diagnosed with major conditions or critical illnesses, a Critical Illness Rider may pay out over half (between 50-80%) of their death benefit for immediate use. Conditions like heart attack, stroke, cancer, blindness, tumors, organ transplants, AIDS, central nervous system diseases, loss of limbs, and other critical illnesses may prompt the need for the rider.

Chronic Illness

A Chronic Illness Rider benefits those with long-term illnesses and disabilities that are unable to perform at least two of six daily living activities:

1. Eating
2. Bathing
3. Toileting
4. Dressing
5. Transferring
6. Continence

Long-Term Care

Long-Term Care Riders are the most expensive living benefits riders, and provide comprehensive coverage for long-term and nursing home expenses. This type of living benefits rider carries the most risk, as it reduces the death benefit and may cost more to keep it afloat if it’s never used.

Living benefits are a critical option for households with disabled family members, those that are considering moving into extended nursing home care, and those with critical illnesses. No matter what your reason, living benefits associated with life insurance policies are here to help when you need it most.

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Sources:

Investopedia: http://www.investopedia.com/articles/personal-finance/013114/closer-look-accelerated-benefit-riders.asp

Bank on Yourself: https://www.bankonyourself.com/life-insurance-living-benefits

NerdWallet: https://www.nerdwallet.com/blog/insurance/should-you-consider-cash-value-life-insurance/

Insurance News: https://insurancenewsnet.com/innarticle/a-deeper-dive-into-chronic-illness-riders#.WfEvv2hSy00

Bankrate: http://www.bankrate.com/finance/insurance/buy-long-term-care-insurance-1.aspx