Many people consider life insurance as a way of providing financial coverage for their family after they pass away. However, life insurance can do more than offer coverage for your family members. With living benefits life insurance, you can get financial help when you are still alive during a certain medical condition. In addition, it’s similar to having emergency savings to support you overcome unexpected difficulties.
Generally, living benefits are a kind of life insurance that is available when you are still alive. In other words, living benefits of life insurance are riders that permit you to receive a part of your death benefit before you die, after a diagnosis of critical sickness. Furthermore, you can include living benefits to your term or permanent life policy as an add-on. However, it comes with no extra charges in some policies.
How Does Living Benefits of Life Insurance Work
Living benefits can either be gotten as a part of life insurance or separately as an extra rider. For instance, if you have a serious, chronic, or terminal sickness, you might have access to receive a part of your death benefits while you are still alive. Additionally, you can use the fund to meet up to your needs like long-term care, lost wages, and medical fees.
Moreover, there are two main types of life insurance for a living benefit:
Term life insurance
This kind of policy offers fixed premiums and coverage for a certain time frame like five, ten, or twenty years. Common living benefits for early access to death benefit for term policy include terminal, chronic, and critical illness.
Permanent life insurance
This policy offers tax-deferred cash value throughout the insured’s lifetime. This cash value is accessible as a living benefit through loans or withdrawals. Examples of this policy include variable life insurance, universal life insurance, and whole life insurance.
Including the living benefits option can be accessible for both kinds of life policies. Each provider will state the main requirements that must be fulfilled before you can receive any money like the necessary documentation and medical requirements.
How Much Does Living Benefits of Life Insurance Cost
Living benefits of life policy can increase your policy premium. Since they can increase the number of eligible events when your insurer would mandate issuing death benefits, policies with living benefits are dangerous. Therefore, it will cost more.
The following factors may also affect the cost of your living benefits:
- Structure of coverage.
- How often do you use tobacco and alcohol products?
- The entire death benefit is accessible.
- Your health background.
- Findings from a physical examination.
- Your weight, height, and age.
How Do Living Benefits Affect Your Death Benefits
Living benefits of life insurance have a direct effect on the amount that would be compensated to your beneficiaries when you die. However, you would get an early advance on your death benefits if you claim living benefits. This implies that the amount you withdrew would be deducted from your policy value, leaving little amount for your family.
For instance, if you withdraw $100,000 with your living benefits rider when you own a $500,000 death benefit on your policy, the amount of your remaining death benefit will be reduced to $400,000. Furthermore, the beneficiaries of your policy might get a much lower death benefit if you have a cash-value policy and an outstanding loan at the time of your death.
Living Benefits Riders
If you get approval for coverage, you can include a living benefits rider to your life insurance if it doesn’t come with it. Generally, it raises the expense of the policy but also offers worthwhile coverage during a critical sickness. For those who are growth and investment-oriented, the additional tax-deferred growth of a cash value policy with extra benefits can offer your family peace of mind.
Furthermore, if living benefits are part of the typical coverage under your policy, you might be able to include some extensions using the rider.
Do You Need Living Benefits of Life Insurance
To know if living benefits of life insurance are a requirement, you should consider the financial coverage level you desire. Living benefits might be worth the additional expense if you want to use a part of your death benefit during a critical illness. Also, discuss your choices and other alternatives for permanent life insurance like acquiring an affordable term policy and investing the funds you save on premiums. This can be done if it’s necessary to utilize cash value as a retirement income strategy for the future.
How to Get Living Benefits of Life Insurance
While you search for a policy, consider the necessities of living benefits life insurance but you cannot include riders to a current policy. Additionally, ensure you read the contract carefully to know if any riders are added immediately and how they work. Also, discover the amount additional living benefit riders will cost from your life insurance agent.
Furthermore, when selecting the kind of policy that suits your needs, consider if you would be eligible for living benefits. Term life policy does not accrue cash value but merely offers a death benefit and the policyholder will offer any living benefits from your policy.