Life insurance with living benefits is a huge upgrade over traditional policies. You probably associate life insurance with a death benefit. In other words, the money that your beneficiary receives when you die. But what if you survive a debilitating blow to your health? Wouldn’t it be helpful if you could tap into your death benefit while still alive?
A brief history of life insurance
Living benefits are a fairly recent concept in the world of life insurance. To understand the need and the significant value they offer, I think it’s helpful to go back to the early days of life insurance.
The first life insurance policies were issued in the early 18th century. That was an era where the average life expectancy was somewhere between 38-44 years of age. It was also a time where people would routinely not survive heart attacks, strokes, cancer, and many other health conditions.
These original life insurance policies were only designed to pay out a death benefit. In other words, as the insured, you had to die for the company to pay any money on the policy.
Fast forward to current times and American life expectancy is an average of 79 years of age. This dramatic increase has a lot to do with amazing developments in medicine. Today, a large percentage of the population will survive at least one serious medical event or condition. Something that not so long ago would have certainly killed them.
While this is great news, it usually brings about some difficulty. Surviving a severe stroke or advanced cancer, for example, will almost always mean the inability to work and earn income for a significant period of time, if not indefinitely. Add to that the astronomical cost of medical bills and it’s easy to see why so many families are financially devastated following a serious health problem.
Enter life insurance with living benefits
These types of policies are designed to give you access to a large percentage of your death benefit should you ever face diagnosis of a covered condition. Each life insurance company’s covered conditions are unique, but they all cover a lot of ground.
This is an example of how one life insurance company’s living benefits [aka accelerated death benefit rider] work at a high level. Each company is different in how their riders are structured, but they all share many similarities.
|Terminal illness||Critical illness||Chronic illness|
|Non-correctable illness or physical condition expected to result in death within 12 months.|
[24 months with certain companies]
|Life threatening cancer, heart attack, stroke, advanced Alzheimer’s, end stage renal failure, major organ failure, ALS, among others.||Diagnosed as a permanent condition that renders you unable to perform 2 of 6 activities of daily living or a severe cognitive impairment.|
|Option to accelerate up to 95% of death benefit to a max of $500,000.||Option to accelerate up to 95% of death benefit to a max of $500,000.||Option to accelerate up to 24% of death benefit at time of claim.|
* This is only an example of the basics of one life insurance company’s living benefits. Each company that offers living benefits has its own unique parameters. *
The reason that life insurance policies with living benefits have become so popular is that they offer you, the insured, financial protection in case you suffer a heart attack, stroke, cancer, renal failure, etc and cannot work and earn money. This type of policy is designed to allow you to tap into the benefit you are paying for, while still alive.
That’s why so many of our clients consider Life insurance with living benefits a huge upgrade.
This benefit is typically paid to you by the life insurance company as a lump sum and is usually not a taxable event. That being said, we suggest consulting with a tax professional as everyone’s tax scenario is unique.
On top of that, there are a few life insurance companies that offer both living benefits as well as the option for a no physical exam application process. These companies have truly raised the bar and met the market’s demand for simple and comprehensive protection via life insurance.
Also, in case you’re wondering, all of the policy options we offer can be purchased online and/or over the phone. Gone are the days of meeting in person at your kitchen table.
Contact us for more info and to discuss which options you may be eligible for.