Most people buy life insurance so their loved ones have financial security if they die. But life insurance could also benefit you while you’re still alive. Some life insurance policies come with living benefits, funds you can use while you’re still alive. These living benefits exist to provide financial support if you are diagnosed with a terminal illness, chronic illness, or need long-term care.
Although no one likes to believe that a serious illness can happen to them, the truth is that it is quite common. for example, about 40% of people will be diagnosed with cancer in their lifetime. And research from the American Society of Clinical Oncology finds the treatment could cost around $20,000 to $30,000 per year, about half the US annual average. uu. household income.
There is also a 70% chance that the average 65-year-old will need long-term care services, according to us. uu. department of health and human services.
what are life insurance life benefits?
Life benefits come in the form of life insurance riders attached to a life insurance policy. These are also sometimes known as accelerated death benefits and are available in both term life insurance and permanent life insurance policies.
Basically, living benefits allow the insured to access the policy’s death benefit money while they are still alive. These funds can be used to pay for expenses associated with terminal or chronic illnesses, such as medical care, hospice or nursing home care, home caregivers, and more. The trade-off is that accessing benefits while living reduces the death benefit available to your beneficiaries when you die.
Examples of common living benefits include:
terminal illness: if you receive a terminal diagnosis with a life expectancy of six months to two years (the exact time depends on the insurer), you can use this clause to cover the end of your life . life care and other associated expenses. Often, a terminal illness rider is automatically included in the policy at no extra cost, but you should check with your insurer to find out.
chronic illness: this clause applies if you are diagnosed with a chronic illness that prevents you from performing at least two of the six “activities of daily living” (adls). these are bathing, eating, dressing, toileting, transferring, and continence.
critical illness: You can also access life benefits with an additional clause for critical illness, which covers qualifying illnesses that shorten life expectancy and have high medical costs. examples include heart attack, stroke, and kidney failure.
Long-term care: This rider allows you to access life benefits if you need to pay for long-term care services and are unable to perform at least two of the activities defined in the adl guidelines. .
Please note that in order to access life benefits in life insurance, you will need to submit a claim to your insurance company along with medical records and other documentation. You can receive living benefits as a lump sum or as needed. Often, you’re limited in how much you can withdraw to a certain percentage or dollar amount of your policy’s death benefit, such as 80%.
how much does life insurance with living benefits cost?
Subsistence benefits can be included with your life insurance policy at no additional charge. For example, a terminal illness rider is usually included automatically in term life policies at no additional charge. ask your insurance agent if there is a critical illness or chronic illness rider or fee.
how to get a life insurance policy with living benefits
If you’re interested in adding life benefits to your policy, be sure to ask insurance companies about your options when you purchase a policy.
It is common to opt for a living benefit rider when you first purchase your life insurance policy. Many policies also automatically come with at least one life benefit rider, such as terminal illness.
It is still possible to add a living benefit rider later. There may also be a waiting period during which you cannot access living benefits. once the waiting period is over, you can file a claim and access your benefits if you are eligible.