Living Benefits
Living benefits, also known as accelerated benefits or living benefits riders, are features or riders that can be added to a life insurance policy to provide policyholders with the option to access a portion of the policy’s death benefit while they are still alive, under certain qualifying circumstances. Living benefits can help policyholders address financial challenges, such as medical expenses or long-term care costs, without the need for a terminal illness or imminent death.
Advantages of Living Benefits
The biggest advantage of living benefits is that you have the opportunity to use your life insurance during your life.
Chronic conditions are common, and an expected risk of aging. 40 million Americans have chronic diseases that limit their daily activities in some way, according to the American National Health Council. 133 million (about 40% of the population) have some type of chronic illness.
Experts expect this number to rise to 157 million in the next couple of years. That doesn’t take into consideration the 81 million people who have multiple chronic illnesses.
A major issue people have to deal with when faced with a diagnosis of chronic illness is the immense cost involved with treatment. The New England Journal of Medicine recently published a study that found people managing chronic conditions only receive 56% of the recommended preventative health care services.
Chronic disease in American represents 75% of all health care costs. Most people can’t afford to pay for all the long-term costs involved with managing a chronic disease.
Then there is a whole list of expenses that come with caring for chronic illnesses that most health insurance plans don’t cover in full or at all. Costs like:
- Nursing home care
- Extended hospital stays
- Medications
- Home care
- Loss of income while ill
Living benefits on a life insurance policy can help. They’re a means to protect your family from the ruinous costs of medical care stacked on top of lost income.
Here are the key aspects of living benefits in a life insurance policy:
- Qualifying Events: Living benefits are typically triggered by specific qualifying events or circumstances, which may include:
- Critical Illness: Diagnosis of a severe medical condition, such as cancer, heart attack, stroke, or organ transplant.
- Chronic Illness: Inability to perform two or more activities of daily living (ADLs) or cognitive impairment, requiring long-term care assistance.
- Terminal Illness: A medical prognosis indicating a limited life expectancy, often less than 12 to 24 months.
- Access to Funds: When a qualifying event occurs, the policyholder can request to access a portion of the policy’s death benefit, often as a lump sum or in periodic payments. The amount available varies depending on the policy terms and the severity of the illness or condition.
- Tax Implications: In many cases, the proceeds received through living benefits are income-tax-free. However, it’s essential to consult with a tax advisor to understand the specific tax implications in your situation.
- Impact on Death Benefit: Utilizing living benefits reduces the policy’s death benefit by the amount withdrawn. Policyholders should carefully consider how accessing these funds may affect the financial protection provided to their beneficiaries upon their death.
- No Repayment Required: Generally, living benefits do not require repayment, unlike traditional loans or advances against a policy’s cash value.
- Cost and Availability: Living benefits may be available as riders that can be added to a life insurance policy for an additional cost. Not all insurance companies offer these riders, and the availability and terms may vary.
- Benefit Triggers: The specific criteria and conditions that trigger living benefits can vary among insurance companies and policy types. It’s crucial to understand the policy’s terms and limitations when considering living benefits.
- Policy Limits: Living benefits are subject to policy limits, which may include maximum benefit amounts or waiting periods after the policy is issued before they can be accessed.
- Medical Documentation: Policyholders typically need to provide medical documentation or proof of the qualifying event to access living benefits.
Living Benefits Carrier Comparison
Summary
Living benefits can provide valuable financial support during challenging times, such as when facing a critical or chronic illness. They can help cover medical expenses, home care, or other costs associated with the illness. However, individuals considering life insurance policies with living benefits should carefully review the policy terms, costs, and eligibility criteria to ensure they align with their specific needs and circumstances.
How USA Investment Solutions Can Help
Our primary goal is to assist families in safeguarding their financial well-being. We partner with over 90 of the country's highest-rated life insurance companies. We will shop them all to find you the lowest rate for the coverage and benefits, taking into account their individual needs and health status. We understand that each individual, business, and family requires a tailored life insurance solution. Our mission is to assist you in discovering the perfect plan for your needs. or complimentary quotes and consultations, please reach out to us s at (714) 794-2009, email us at info@usainvests.com, or fill out our contact form. We're here to assist you, and there's no pressure to commit. Even if you're currently working with a professional, seeking a second opinion can offer valuable insights and perspectives.