Life insurance decreases the financial risk of your death for your loved ones, providing the funds they need to keep living when you die. 

But not everyone knows that some policies can actually provide you or your loved ones money while you are still alive.

I highly recommend that clients I work with look into living benefits as they shop for life insurance. 


How do living benefits work?

There are two types of living benefits in life insurance. 

The first kind is cash value life insurance. In permanent life insurance policies, there is a savings aspect that is built right into the policy. This is called “cash value,” and the longer you have the policy, the more the cash value grows. 

Cash value life insurance gives you the option of withdrawing or taking out a loan from your policy’s cash value. For instance, some people use their life insurance’s cash value to supplement their retirement income.

The second kind is policy riders. Riders are basically “add-ons” to your policy that allow you to benefit in different ways. In the case of living benefits, this would allow you to access some of your “death benefit” – or cash payout – in particular situations.

For instance, you can have a living benefits rider that will allow you to access your life insurance money if you are diagnosed with a chronic, critical or terminal illness. You have to pay extra for this in most cases, however, it could help you afford expensive treatments or care while you are alive, instead of leaving your loved ones with a mountain of medical or care debt upon your eventual death.

There are many kinds of riders, including long-term care riders which kick in if you need long-term care that isn’t covered by regular health insurance. There are also accelerated death benefit riders, which might activate if you are diagnosed with a critical or serious illness. 

Another type is return-of-premium riders, which could refund you some or all of your premium payments if you outlive the term of your policy. This is one of the most expensive riders, and you can’t cancel your policy before it expires.

Finally, there is the waiver of premium rider, which allows you to suspend your premiums while still keeping your policy. This is useful if you become disabled and are unable to work.


What are the pros and cons of living benefits?

There are plenty of pros when it comes to living benefits. The biggest benefit is that it offers you extra financial security if you become sick or need extra care later in life — or even just an extra source of income. 

We can’t predict the future and what challenges we may face, but we can prepare ourselves and protect ourselves and our families from financial stress or disaster.

Having that protection can save you from accumulating massive debt 

The biggest downside of living benefits is that they often reduce the death benefit for your survivors – especially if you had to draw upon it while you were still alive.

Everyone’s needs and concerns are different, so getting a personalized insurance plan is key to your peace of mind. I’d love to sit down with you to discuss if living benefits are a good choice for you, and what kind would be best.

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