Life Insurance

LIVING BENEFITS - "Benefits You Don't Have to Die to Use"

Most people know life insurance can help provide financial security and continuity during one of life's most difficult times: the death of a loved one. What few people know is that life insurance can also help during another one of life's most difficult times: a chronic, critical or terminal illness. This help comes in the form of optional riders called Accelerated Death Benefit Riders, also generically known as Living Benefits, which can be added at no additional cost.

These living benefits can be effectively used as protection against chronic and critical illness as well as to pay for nursing home care. They can be paid directly to the chronically or terminally ill policy holder before he or she dies. These payments can be collected early under circumstances such as:

  • Terminal illness with death expected in a specific time frame (usually within 6 months to 1 year).
  • The occurence of a catastrophic event requiring extraordinary treatment, such as an organ transplant.
  • Long-term care needed due to inability to do everyday activities such as dressing, bathing, eating, etc.

Depending on the insurance company and the specificity of the policy, the amount of cash paid out varies. The cost is usually paid by being added onto the insurance premium. However, the amount paid to the beneficiary is reduced by the amount the policy holder received as an accelerated benefit.

There are some things to consider before getting accelerated benefits.

  • Typically life insurance is bought to protect one's spouse and children in the event of their death. The policy holder must consider how these benefits will affect their surviving loved ones; if the owner's death benefits are used up in paying for the accelerated benefits, no benefit is paid to the family after his or her death.
  • Accelerated benefits can be used to cover some expenses, such as long-term care or treatment for catastrophic illnesses. However, they are neither a complete health insurance nor a good replacement for health insurance/long-term care insurance.
  • Dependng on various factors such as state, insurance carrier, type of claim and type of benefits, there may be taxes owed.
  • Medicaid eligibility may also be affected, since this money can be considered as income.

At any rate, accelerated benefits can provide sufficient protection for certain expenses in light of difficult times and impending death.

Check with your insurance provider or employer to see if your policy includes accelerated benefits or has an option to be added.