Why You Should Get Living Benefits Insurance

One of the major reasons for having life insurance is to provide money to your loved ones when you pass away. For many other people, the reasons are simply to pay for burial costs after they die. However, some plans allow you to take advantage of the cash value of the policy or expedite the death benefit while you are still alive.

Life insurance is ideal for protecting your family when you pass away, but plans like term life insurance with living benefits help you to protect yourself and your family in the event of a critical or chronic illness while you are still alive. We'll explain living benefits and what some of the best companies are.

What are living benefits?

Some life insurance plans allow you to build cash value throughout the lifetime of your policy. This is referred to as a living benefit of life insurance because, unlike a death benefit that is paid out after you die, you can use the cash while you are still alive.

When a qualifying life event occurs such as a terminal illness or permanent disability, you could be eligible to access your living benefits.

Term and permanent life insurance plans both offer living benefits. They are used as expedited benefit riders to aid with the costs of critical, long-term chronic, and terminal disease conditions. Fortunately, they are included at no extra cost in many plans.

Term Life Insurance With Living Benefits

Term life insurance protects you for a specific period. It pays out money to your beneficiary if you die during that set time period. Term life insurance policies are usually less expensive than whole life insurance policies since they only last for a limited amount of time.

Many life insurance companies provide riders, or supplemental coverages or benefits, to your policy, allowing you to tailor it to your individual requirements. You can add a rider to a current or new policy for an additional fee.

A living benefit or terminal illness rider, often known as an accelerated death benefit rider, is one of the most common riders.

Terminal Illness Rider

If you are diagnosed with a terminal disease, this living benefit will pay out a part of your term life insurance policy. This provides you with much-needed funds to cover medical costs, debt, and other obligations. Some people choose to use the money to take a dream trip or to create memorable moments with their friends and family without the stress of managing family finances.

Various insurance companies have different life expectancy timeframes for when you can receive cash. Before you can get the living benefit, the insurance may need to be in place for a specific period of time.

In addition, interest may be applied to the amount of the accelerated death benefit that you have to use. The advance payment is generally deducted from the amount paid to your beneficiaries after your passing.

Return of Premium

With this living benefit, all premiums paid throughout the term are repaid to you if you do not die within that term. This type of coverage is generally more expensive than a standard term life policy.

Waiver of Premium for Disability

A waiver of premium for disability is a clause in an insurance policy that specifies that if the insured is critically injured, the insurance company will not require them to pay the premium on their policy.

If you can't work for six months or more due to a long-term disability, you can use this living benefit to avoid paying your premiums.

While it is not a genuine monetary benefit, it is a vital alternative to have because there is a 30% chance that you may experience a condition that takes you out of work for 90 days or longer at some time during your working career.

Whole Life Insurance With Living Benefits

Whole life (a.k.a permanent life) insurance provides lifelong protection while also accumulating tax-deferred cash value over time.

Whole life insurance, like term life insurance, offers a death benefit. It also allows you to grow cash value on a tax-deferred basis, but term insurance does not.

With whole life insurance plans, you get the option of the terminal illness rider benefits, and you can access the cash you need in four other ways.

#1 - Cash Value Withdrawal

This cash value withdrawal allows you to access a part of your whole life insurance policy's cash value. If the money you take is less than or equivalent to your premium payments, you won't have to pay any taxes on it. You will, however, be taxed if any percentage of the money you take is from interest, dividends, or capital gains.

#2 - Long-Term Care Benefits

Including a long-term care benefit to your whole life insurance policy allows you to use the death benefit to pay for long-term care expenses that your health insurance won't cover. The amount of the long-term benefit that you use is usually deducted from the death benefit.

#3 - Policy Surrender

A policy surrender occurs when you terminate your permanent life insurance policy to get the cash value component as a one-time lump amount. That sum will be given to you by the insurance company, less any outstanding debts or unpaid premiums.

#4 - Policy Loan

If you take out a loan against your whole life insurance, you will be paid interest, but it will be lower than the rate charged by other lenders. You will also not be subjected to a credit check, providing proof of a salary or passive income, or a slew of other requirements to get a traditional loan.

Finding the Best Insurance Company and Rates

A qualified insurance agent can help you investigate the living advantages of life insurance and answer any other questions you may have. You can also work with an insurance company directly. The following are some reputable insurance companies that offer living benefits:

●       AIG Term Life: AIG has a term life insurance policy that includes a Quality of Life plan with living benefits. It was formed in 1919 in Shanghai, China, and is present in over 80 countries. They received an A credit rating from AM Best in 2020.

AIG's term, universal, and whole life insurance plans provide living benefits. You can apply from anywhere in the country, but you must first talk with an agent. The terminal illness rider is included in the Select-a-Term plans, while the Quality of Life Flex Term policy has built-in accelerated death payments for chronic, critical, or terminal disease.

Depending on your insurance agreement, both plans may guarantee a minimum benefit. For an additional cost, you can add a disability waiver of premium riders.

●       Haven Life Insurance: Haven Life has quick online quotes, a simple application process, and no medical exam for the Haven Simple insurance. Haven Life is powered by MassMutual and has been providing online term life insurance since 2013 but MassMutual was founded in 1851. They have an A++ credit rating from AM Best.

Haven Life provides two plans with living benefits, Haven Term and Haven Simple, and you can apply online or by phone. Haven Term is accessible across the U.S. However,  Haven Simple, which does not require a medical checkup, is not accessible in California, Delaware, South Dakota, and North Dakota.

Haven Life plans include living benefits such as accelerated death benefits and premium waivers in the event of disability.

●       Mutual of Omaha: Mutual of Omaha is one of the greatest options for seniors since it provides life insurance plans with accelerated death benefits for people up to the age of 85. The Omaha, Nebraska-based firm was founded in 1909 and got an A+ credit rating with AM Best.

Mutual of Omaha provides a variety of life insurance policies, such as term, whole life, children's whole life, universal, and accidental death insurance. You can also add riders to your insurance for a potential additional fee. Living benefits can also be included in both universal and whole-life policies.

As people live longer lives, there are more circumstances in which living benefits riders may be an appealing choice. You may develop a terminal illness or permanent disability and require financial assistance to cover your medical expenses.

The cost of your life insurance premiums varies depending on the company, policy type, and term length. Other factors that may influence premium costs include your age, health, smoking status, and add-on riders such as living benefits. In general, the younger you are and the healthier you are, the cheaper your insurance rates will be.

While certain plans may include built-in accelerated death benefits, this is not always the case. So be sure to ask about the factors in your policy when considering living benefits.

About The Author: Imani Francies writes and researches for the life insurance comparison site, QuickQuote.com. She enjoys helping people find the best life insurance policy and rates that meet their specific needs.