Living Benefits

Living Benefits give you access to money while you are still alive

Life insurance has changed in recent years, and for the better. In certain situations, you may access your death benefit while you’re alive. That’s right — if you have a qualifying illness, part of your benefit amount can be given to you, so you can use it while you’re still living! This policy feature is called a “Living Benefit.”

The cost, benefits, qualifying event, and exclusions can vary by company.

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Does All Life Insurance Include Living Benefits?

Some insurance providers offer living benefits riders at an extra cost, while others automatically include the rider(s) in the policy.

We focus on working with insurance companies that do NOT charge any extra fees for their living benefits policies, which are included with no extra charge with their term, universal life, or whole life products.

Insurers sometimes charge administrative fees. However, there’s no federal tax on living benefits, and the rider is extremely useful if you’re faced with a chronic, critical, or terminal illness or a permanent disability.

Common Types of Living Benefits

Let’s talk about the 3 most common types of living benefits and the qualifying events:

1) Chronic Illness

Here’s what often defines a chronic illness: it’s one that you can’t recover from, and you’re unable to perform 2 of the 6 activities of daily living (ADLs) or have a cognitive impairment like Alzheimer’s or dementia.

The six ADLs are generally defined as:

• Bathing

• Dressing

• Eating

• Transferring (walking from a bed to a wheelchair)

• Toileting

• Continence (bladder control)

If you’re not able to do at least 2 of these 6 activities on your own, you might qualify to use your life insurance living benefit.

Most companies will advance up to 2% of the death benefit per month for 4 years , which could provide your family with a lot of money and peace of mind. As an example, a $200,000 death benefit policy would provide approximately $4,000/month in chronic illness benefits.

2) Critical Illness

Let’s assume you’re not chronically ill, but you have an acute illness. In that case, here are some major acute illnesses:

• Cancer

• Heart Attack

• Stroke

• Major Burns

• Coma

• Benign Brain Tumor

• Major Organ Transplant

• End-Stage Renal Failure

• Heart Valve Replacement

• Blindness due to Diabetes

• Invasive Metastatic Cancer

• Coronary Artery Bypass Graft Surgery

If one of these situations occurs, you may be able to access your death benefit. Some carriers will accelerate your death benefit up to 90%.

3) Terminal Illness

If someone has a terminal illness, they usually have less than 24 months to live. In this case, you might be able to get up to 90% (or even 100%) of your death benefit while you are still alive.

The net amount received may vary based on the company’s policy and contract terms.

How Much Can You Get In Advance?

You’ll want to check your policy to see how much the carrier will payout. In general, a living benefits rider will pay you somewhere between 24% and 100% of the policy’s total death benefit. But several of these also involve a fixed dollar limit.

Say, for example, your policy lets you take 50% in an accelerated death benefit. In that case, your family will still get the remaining 50% when you pass away. After you use the living benefit, the insurance company should update your policy to show the remaining death benefit. Then, the revised policy stays active until you die — so long as you keep paying premiums. Your premiums will be modified to fit the new death benefit amount.

In Summary

Every company and policy has its qualifying definitions and payout variables for living benefits. Let us help. An agent at Black Swan Insurance Group can discuss your options with you and determine the kind of coverage that’s best for you and your loved ones.

Three main events trigger living benefits, and each will allow you to accelerate money from your policy amount while you’re still alive.

If you’d like help in deciding whether taking a living benefit is in the best interest of your family, call us at (513) 647-3110.

(513) 647-3110

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