Historically life insurance companies referred to accessing the cash value of a permanent policy as the only living benefit offered. A few companies offer additional living benefits where a policy owner can access a term or permanent death benefit while the insured is still alive for several specific reasons. Access to some or most of the death benefit can be available for terminal illness (24 months or less diagnosis), chronic illness (cognitive impairment or inability to perform some activities of daily living) and critical illness (specific named ailments including cancer, heart attack, stroke, major organ transplant and kidney failure to name a few). In many cases there is no charge for these benefits. We refer to these quality of life benefits as life insurance you don’t have to die to use.
Not all carriers offer such benefits and a select few that do calculate the living benefit much higher than others. Some carriers have chosen to offer more substantial living benefits to their clients which can make a big difference financially during a time of great need where the insured is sick but has not passed away. In many cases, living benefits can be utilized to cover expenses while out of work, obtain otherwise unavailable treatment (including foreign providers not covered by health or long-term care insurance) or to cover the cost of bringing the family together during a time of need. The ability to access these cash benefits from either term or permanent policies while the insured is still alive is the most relevant innovation in life insurance for decades. Riders offering guarantees are based on the claims-paying ability of the issuing insurance company.
To learn more about which carriers offer living benefits and what they can mean for your financial planning, consult a Trilogy Advisor.