Life insurance is not only about the death benefits your beneficiary receives after you pass away. These policies can also give you benefits while you are still alive. These are called living benefits.

Living benefits let policyholders access a portion of their death benefit early. This can be a real game-changer when facing serious health issues or financial needs. Instead of your beneficiaries waiting, you can use this money to cover medical costs, living expenses, or other urgent needs.

Life insurance policies with living benefits come in various types. You may find them in term life, whole life, or universal life policies, and each has its own criteria and conditions for accessing these benefits.

Living benefits matter because they add flexibility and security. Imagine needing extra funds to handle a severe illness or support yourself if you are unable to work. Having access to living benefits can offer peace of mind and financial help when you need it most.

Types of Living Benefits and How They Work

Terminal Illness Rider: This benefit allows you to access a portion of your life insurance payout early if you are diagnosed with a terminal illness with a life expectancy of less than a certain period (usually 12 months). This money can cover anything from medical bills to making lasting memories with loved ones. Each policy is different, so it is crucial to understand what your insurance company offers and any associated conditions.

Critical Illness Rider: This rider provides a lump sum if you are diagnosed with specific serious illnesses like cancer, heart attack, or stroke. It can be a lifesaver for covering treatment costs and other related expenses, giving you financial breathing room when you need it most.

Chronic Illness Rider: A chronic illness is defined as a condition that prevents you from performing at least two of the six basic activities of daily living (ADLs): bathing, dressing, eating, toileting, continence, and transferring (moving in and out of a bed or chair). This rider can provide financial support for medical expenses, in-home care, or other needs that arise due to the chronic illness.

Lifetime Income Rider: Provides policy disbursements for life. Choose an irrevocable disbursement option: level, increasing or potentially increasing.

Knowing how to use these benefits is as important as knowing they exist. Always review your policy with an insurance agent to understand your options fully. An insurance agent can explain the fine print, help you determine eligibility, and guide you on how to claim these benefits effectively.

Pros and Cons of Using Living Benefits

Living benefits in life insurance policies offer significant advantages. One of the biggest perks is financial support during challenging times. Whether facing a medical crisis or needing funds for daily expenses, these benefits can provide a crucial lifeline. Accessing these funds can reduce financial stress, allowing you to focus on recovery or maintaining a quality of life.

However, there are potential downsides to consider. Using your living benefits reduces the death benefit that your beneficiaries will receive. If your family relies heavily on that money, it could impact them long-term.

Balancing the pros and cons involves assessing your specific needs and circumstances. Think about your health, family needs, and financial situation. The type of rider you choose should align with these factors. Exploring different policies and talking to insurance advisors can help clarify what’s best for you.

Real-Life Examples

• John and Sarah: When Sarah was diagnosed with breast cancer, their living benefits helped cover her medical bills and allowed John to take time off work to care for her.
• Michael: After a car accident left him paralyzed, Michael used his living benefits to modify his home and purchase a wheelchair-accessible vehicle.

Conclusion

Living benefits can be a valuable addition to your life insurance policy. By understanding your options and carefully considering the pros and cons, you can make an informed decision that provides financial security for you and your loved ones.