Many people think of life insurance as the money that is paid out after someone passes away; however, there are living benefits of life insurance, which is money that can be used when you are still alive. Here’s how living benefits work, and what they can be used for.
What is a living benefits rider?
Some life insurance policies include a “living benefits rider.” This allows you to borrow a percentage of the money from your death benefit if you are diagnosed with a terminal illness. This is also referred to as “accelerated death benefits” or a “terminal illness rider.” Depending on your insurance company, you may be able to add a living benefits rider to your policy.
What can living benefits be used for?
This money can be used however you’d like. Most people use it to pay for treatment, long-term care, medical expenses, or a vacation.
What type of life insurance includes living benefits?
There are various life insurance options including term, whole, and universal life insurance.
Term life insurance covers you for a certain amount of time (a term), usually between 10-30 years. Each month, you pay a fixed amount, also called a premium, towards your policy. If you pass away during the term, your beneficiaries receive a payout from your policy. If you do not pass away, the benefit is non-refundable, unless you have a “return of premium” policy. Most life insurance companies allow you to add on a living benefits rider to your term life insurance policy for an additional cost.
Whole life insurance and universal life insurance offer lifelong coverage for an individual. With these policies, your premiums go towards a death benefit along with investments or cash savings. With these policies, you can borrow against the savings that you have accumulated, which can be used however you’d like. This must be paid back before the death benefit is needed, otherwise, you will only receive a partial payment of the benefit.
Other benefits of life insurance
Some life insurance companies include other benefits as part of their policies. For example, you may get a discounted rate at fitness centers, or in other areas that help you lead a healthy lifestyle. As mentioned, with a whole or universal policy, you may accumulate a tax-deferred cash benefit in addition to the death benefit. Many people find this very valuable to have access to before the death benefit is needed.
To know more about how Living Benefits of Life Insurance work and what they can be used for, please contact Chad Charton at 818.609.9412 or chad.charton@gasparinsurance.com.
