Does Your Life Insurance Policy Have Living Benefits?

Many people hate talking about purchasing life insurance for themselves. This may be because it means that they have to envision what life will look like after their death, and sometimes this can be a scary thought. What many people do not realize is that certain types of life insurance can be used before a person dies. Certain types of policies can contain living benefits that will allow the policy to be utilized by the living. Understanding what these benefits are and how to use them may make you look at your insurance coverage a little differently.

What Is A Living Benefit?

Living benefits which are also called accelerated benefits under some policies are life insurance proceeds that are available to the insured prior to his or her passing. Depending on the policy, these benefits may be included as a part of the policy or may be added on as an additional rider or attachment to the policy. Some companies may require you to add them at the time the policy is written, while other companies may allow you to add them at a later date.

Living benefits allow you to access a portion of, or all of your policy benefits upon the experience of certain types of life events. Most policies will allow you to access a certain percentage of your death benefit, although the actual amount may vary based on the terms and conditions contained within your policy These events that may trigger your ability to use your living benefits include some of the following:

  • Diagnosis of certain chronic, critical, or terminal illnesses
  • Loss of activities of daily living
  • Need for long-term care and more

The benefits that you receive while you are living are then deducted from the death value of the policy or the amount that your beneficiary will receive once you die.

These cash benefits can be obtained free from federal tax, although they may be subject to state tax. To find out whether or not they will be taxable in your state, contact your state's tax office or your accountant.

Are Living Benefits Included With All Types Of Life Insurance?

Living benefits riders were a component that was created in the early 1980s as a rider to variable annuities and variable life insurance products in order to help to preserve the assets that were contained within these products. Although, these were used in slightly different ways than the types of riders that are currently being used with insurance products, they created the market.

Living insurance benefits have most commonly been seen as a part of a whole life insurance product. These benefits have normally been sold as a part of the enhanced coverage that whole life or permanent insurance was able to provide. This has changed.

Many insurance companies will now offer you the ability to purchase living benefit riders as a part of your insurance no matter if it is term or whole life. Once purchased, these riders will stay in force for as long as you have the policy or as long as you pay the additional premium.

How Do You Access Your Living Benefits In Your Life Insurance Policy?

If you are needing to use your living benefits, you first need to contact your insurance agent, or your insurance company to discuss your options. Most companies will need for you to sign a release to allow them to communicate with your health care provider. They will need to have your health care provider to verify the information about your condition that will entitle you to these benefits.

Once this is done, you will be able to access your benefits. Your insurance company may allow you to access the entire amount you are entitled to as one lump sum, or they may pay you a monthly amount, up to the maximum amount you are entitled to receive. When you speak to your insurance agent, they will be able to outline these options for you.

When you become ill or unable to take care of yourself, the last thing you need to worry about is how you are going to pay the bills until you get better or die. By being able to access the living benefits in your life insurance policy will help to alleviate that worry.

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