What Are Some of the Living Benefits of Life Insurance?

Life insurance serves as an important safety net, providing financial security for our loved ones. But did you know that life insurance can also offer benefits while you are still alive?

These benefits, known as living benefits, offer financial security beyond the traditional death benefit. Imagine facing a chronic illness or receiving a terminal diagnosis — having access to a portion of your life insurance policy can ease the burden of medical expenses and ensure your family’s well-being. In this article, we explore how the living benefits of life insurance enhance financial stability and peace of mind for both you and your loved ones.

Life insurance for now and for later

There are several “living benefits” to life insurance such as tax advantages and investment strategies. But true living benefits of life insurance refers to features that you can access while you’re still alive.

Keep in mind that accessing living benefits reduces the death benefit available to your beneficiaries when you pass away. Furthermore, there are penalties and important information you should consider regarding accessing life insurance funds early, such as surrender charges, tax implications, and a reduction of your death benefit. Therefore, it’s important to understand the terms and conditions of your policy and discuss them with your insurer.

Living Benefits Riders

Many life insurance policies come with optional riders. These riders offer  financial options during challenging times, such as terminal illness, chronic illness, or long-term care. In many cases, it can protect savings and other investments by using the insurance company’s money first. Here are some key points about these living benefits:

  • Terminal Illness: If you receive a terminal diagnosis with a life expectancy of six months to two years, you can use a terminal illness rider to cover end-of-life care and other associated expenses.
  • Chronic Illness Rider: Living benefits can help cover expenses related to chronic illnesses. These may include medical care, hospice, nursing home care, and in-home caretakers.
  • Critical Illness: Some life insurance policies offer riders that allow you to access part of your death benefit if you are diagnosed with a major illness. This can provide financial relief during challenging times.
  • Long-Term Care: Living benefits can also be used for long-term care services, such as nursing home care or in-home assistance.

Cash Value Accumulation

Certain types of life insurance policies build cash value over time. This cash value grows on a tax-favored basis and can be accessed through withdrawals or loans. Policyholders can use this money for whatever needs they choose, such as funding a child’s education, covering health costs and emergency expenses, or supplementing retirement income. The cash value acts as a financial safety net, providing flexibility and financial security.

Long term planning    

Life insurance is not just a tool for providing financial protection after death. It offers several living benefits that can help with planning for long-term health costs, provide tax advantages, and support long-term financial goals. By understanding and having these benefits available for themselves policyholders can maximize the value of their life insurance and be better prepared for various life events. Whether it’s through cash value accumulation, tax advantages, or living benefits riders, life insurance can be a versatile and valuable component of a comprehensive financial plan.

Did you know? Only 52% of American adults report having life insurance. Read all about what percentage of people have life insurance and other life insurance statistics in our blog.

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