Most people think of life insurance as money that pays out after death. Living benefits change that. They let you access part of your policy's death benefit while you're still alive if you face a serious illness.
How living benefits work
Living benefits are usually offered as accelerated death benefit riders. If you're diagnosed with a qualifying condition, you can request an advance on a portion of your death benefit. The amount you receive is then subtracted from what your beneficiaries get later.
Some riders are included in a policy at no added premium, while others cost extra. The details depend on the insurer and policy.
The three common types
Terminal illness
Pays part of the death benefit if you're diagnosed with an illness expected to result in death within a defined period, often 12 or 24 months.
Chronic illness
Pays if you can't perform a set number of activities of daily living, such as bathing, dressing, or eating, or if you have a severe cognitive impairment.
Critical illness
Pays after a diagnosis of specific conditions listed in the policy, which commonly include heart attack, stroke, and certain cancers.
Why living benefits matter
A serious illness often brings two financial hits at once: higher medical and care costs, and lost income. Health insurance covers some medical bills, but not your mortgage, groceries, or a spouse taking time off work.
Living benefits can help pay for:
- Treatment, deductibles, and out-of-pocket costs
- In-home care or assisted living
- Household bills while you can't work
- Travel to specialists
What living benefits don't do
- They aren't a replacement for health insurance or disability insurance.
- Using them reduces the death benefit left for your family.
- Payout amounts may be discounted from the face value depending on the policy.
- Payments may affect eligibility for some government benefits, and tax treatment can vary.
Questions to ask before you buy
- Which living benefit riders are included, and which cost extra?
- Which conditions qualify, and how does the policy define them?
- How much of the death benefit can I access, and is there a discount?
- Are the riders available on term policies, permanent policies, or both?
- Is the rider available in my state?
Who should consider living benefits
Living benefits are especially worth considering for parents, primary earners, people without large emergency savings, and anyone with a family history of serious illness. They turn life insurance into protection you could actually use during your lifetime.
Get a free policy review
Already have life insurance? Many people don't know whether their policy includes living benefits. Jeeyar Solutions can review your current coverage and explain your options. Request your free review.
This article is for educational purposes only. Rider features, definitions, costs, and availability vary by insurer, policy, and state.
