We all know that life insurance gives a benefit when you die. Most people have some type of term life insurance or group life insurance but that is only real assistance when you die. Many life insurance policies also contain living benefits! What about all the combinations of things that could happen to you before you die? Life Insurance could seem pretty worthless if you need that money today for a chronic or critical illness. A living benefits rider might be the one exception a younger person would want to get life insurance before they are married or have children. Having living benefits could prevent you from doing the worst and forcing you to use or access an IRA, 401k, liquidating CD’s or other assets preemptively. Using any one of these assets preemptively usually has financial penalties.
Living benefits of life insurance are meant to cover the following types of illnesses: Critical Illness, Chronic Illness, and Terminal Illness.
Critical Illness is a specified medical condition that may qualify for the critical illness benefit to include kidney failure, stroke, cancer, major organ transplant, and heart attacks. Chronic illness is defined as being permanently unable to perform, for at least 90 consecutive days, without substantial assistance from another person, at least two Activities of Daily Living (toileting, continence, bathing, dressing, eating, and transferring) or requires substantial supervision by another person to protect against threats to health and safety due to severe cognitive impairment. Terminal illness is defined as the insured(or beneficiary) who has been diagnosed with a medical condition that results in a life expectancy of 24 months or less (can vary by jurisdiction).
If you have employer-provided short term and long term disability benefits supplied this should lessen your need for living benefits. Of course, if your employer does not provide these this increases the need for you to find a living benefits rider with your life insurance. Also, remember that Social Security disability benefits do not begin until after the sixth full month of having a disability. Every living benefits policy offers different levels of benefits to be disbursed at different rates. Ensure your insurance advisor shows you the illustration with the specific benefits and the rate the will be given to you.
What should you use your living benefits for?
Well, this depends on a lot of factors. If you are ill your estate might be loaded with medical bills your health insurance did not cover. If you are covered well with good health insurance and have no excessive medical bills you might want to attack your current debt load. Paying off credit cards, cars and then house debt should assist you in relieving you of your income needs. The great thing about living benefits it is up to you what you use them for.
You are probably asking yourself how much a month do living benefits cost with a term life insurance policy.
Of course the larger the amount of the living benefit rider policy the more expensive the policy will be. Still, it is about 25 to 50% more expensive for living benefits than the typical term life insurance policy without a living benefits rider. Still, you might want to layer the term life insurance policies with a term life insurance policy that has living benefits and another life insurance policy without living benefits to keep costs down. Our two preferred living benefits life insurance companies, are Transamerica and North American. We will still run a quote with your individual attributes to find the most appropriate policy at the best rate for you. If you want to do a review of your current life insurance policies so that you can have the power to decide if you are fully covered we can help you. We will run a policy illustration on any product with living benefits to see if it is the best fit for your price and coverage.
*This article was written by a licensed insurance advisor.
I am a term life, infinity banking concept, indexed universal life insurance, and annuities advisor. I am looking to give Utahans a choice in life insurance as an independent advisor. I represent over 25 different insurance carriers on your behalf so we can find which one will approve you for the best policy. I started this company (Wasatch Smart Finance) so people like you could finally get honest answers & advice from advisors who have a comprehensive knowledge of finance and estate issues. Also as a Veteran, I want to assist other Veterans in their financial journeys.