Living Benefits in Life Insurance: What Is It and Is It for You?

A standard life insurance policy provides a death benefit to your beneficiary when you die. But living benefits on a life insurance policy are benefits you can use while still alive.

If you buy term life insurance, you usually have the option to customize your policy with several living benefit options. A permanent life insurance policy, such as whole and universal, can include the same living benefits with the added benefit of cash value access. Evaluating the pros and cons of living benefits life insurance is vital, ensuring you get the right coverage for your needs.

Depending on your situation, you may not need living benefits on a life insurance policy. A standard term life insurance policy without living benefits is often the most cost-effective option and may be the best for individuals in certain situations.

• What Are Living Benefits in Life Insurance?
• How Do Living Benefits Work?
• Life Insurance Cash Value: Another Kind of Living Benefit
• Limitations of Living Benefits in Life Insurance
• Should You Purchase Life Insurance With Living Benefits?
• How to Get Living Benefits in Life Insurance
• How to Claim Living Benefits of Life Insurance
• FAQ About Living Benefits in Life Insurance

Some people use living benefit options on their life insurance policy as an extra source of income in specific situations. The most common life insurance living benefits are accelerated death benefits. These benefits are available on both term and permanent life insurance policies.

Living benefits of life insurance grant access to part of the death benefit if the insured experiences a qualifying health condition. Once approved, the life insurance company accelerates or makes available a portion of the death benefit. Claiming living benefits on a life insurance policy reduces the amount the beneficiary receives upon the insured’s death.

If you’re trying to decide if life insurance with living benefits is worth it, consider this:

• According to the CDC, 6 in 10 adults live with a chronic illness. Four in 10 live with two or more.
• Three in 10 Americans can’t afford a $400 bill without using a credit card.
• A person turning 65 today has a close to 70% chance of requiring long-term care services. Twenty percent will need them for five years or more.
• Cancer is just one form of terminal illness. The American Cancer Society estimates 1 in 5 men have a risk of terminal cancer, while 1 in 6 women have the same risk.

Unlike a death benefit, which only works once you pass away, living benefits work as life insurance you can use while alive. When you choose a living benefit option in a life insurance policy, you’re giving yourself access to funds that wouldn’t be available otherwise. When you buy a standard term life policy, you get a cheaper rate because the only benefit is the death benefit your beneficiary receives after you die.

Life insurance living benefits enable policyholders to draw upon their insurance benefits early under certain conditions, thus providing financial relief during critical times. This feature makes life insurance with living benefits a versatile financial tool, not just a posthumous benefit.

Living benefits can be added to various types of life insurance policies, enhancing their utility by providing financial support during the policyholder's life under certain conditions. The most common policies that offer living benefits include term, whole and universal life insurance. Each policy type caters to different financial needs and goals, making it vital to understand their specific features and benefits when choosing the right coverage for your circumstances.

Term Life Insurance

Term life insurance is designed for temporary coverage with a set duration, such as 10, 20 or 30 years. Getting term life insurance with living benefits allows you to access part of the death benefit if you face a qualifying illness or condition during the term.

Living benefits in term life insurance are commonly available as optional riders. However, some insurance companies might include certain living benefits as standard features for term policies.

Whole Life Insurance

Whole life insurance offers lifelong coverage and the guarantee of accumulating cash value. Living benefits of whole life insurance often relate to the cash value.

While many living benefits are available through optional riders, some insurers include basic forms of these benefits, like accelerated death benefits for terminal illness, as part of the standard policy package. This makes whole life insurance with living benefits a comprehensive financial planning tool.

Universal Life Insurance

Universal life insurance combines the permanent coverage of whole life with the flexibility of adjustable premiums and death benefits. Similar to whole life, living benefits in universal life insurance often refer to the cash value component.

Other living benefits in universal life insurance are typically offered through optional riders that provide access to funds in cases of chronic or terminal illness. Depending on the insurance provider, some basic living benefits may be included as standard parts of the policy. Having universal life insurance with living benefits allows policyholders to adjust their coverage as their financial situation changes while also having the ability to access funds in cases of chronic or terminal illness.

Living benefits in life insurance offer valuable support during critical times, but they come with certain limitations. Understanding these restrictions is important for making informed decisions.

• Eligibility Criteria: Not all policyholders may qualify for living benefits in life insurance. Eligibility often depends on specific medical diagnoses or conditions, and the criteria can vary between insurance providers.

• Reduction in Death Benefit: Accessing life insurance living benefits may reduce the overall death benefit available to beneficiaries, potentially impacting the financial support provided after the policyholder's death.

• Claim Limits: Insurance companies may impose limits on the amount that can be withdrawn through the living benefits of a life insurance policy, either as a percentage of the death benefit or a set dollar amount.

• Additional Costs: Some living benefits riders may require an additional premium. That means life insurance with living benefits costs more than a standard policy.

• Waiting Period: There may be a waiting period from the time the coverage is signed until the date when the living benefits become effective, restricting immediate access.

The pricing of life insurance with living benefits can vary significantly based on the type of policy, the extent of coverage and the specific living benefits chosen.

Generally, adding living benefits to a life insurance policy, especially through optional riders, can increase the premium costs. These benefits offer the potential to access the policy’s value before death, which presents a higher risk to the insurer.

It's important to compare offers from various life insurance companies with living benefits to find the best balance between cost and coverage, ensuring the policy fits within your financial plan while providing the necessary security.

Although most living benefits life insurance riders come with additional premiums, some are free with your policy. The most common free living benefit is the accelerated death benefit for terminal illness. Ask your agent if you’re not sure whether you have living benefits on your life insurance policy. If you’re looking to purchase life insurance with living benefits, let your agent know so they can tailor your quote and policy to your specific needs.

There are several reasons to purchase living benefits life insurance. If there’s a family history of chronic or terminal illness, you think you could outlive your retirement income or you plan to start a business, this might be the best policy for you.

Here are some compelling reasons to consider a life insurance policy with living benefits:

Understanding how to effectively navigate the claims process for living benefits of life insurance ensures you can utilize your life insurance policy to its full potential when needed most.

In some situations, buying life insurance with living benefits is worth it. However, every person's needs and circumstances are different. Reviewing the answers to some of the most commonly asked questions about living benefits can help you determine whether are worthwhile.