Finance: Which Life Insurance Benefit Is Considered Living?

Understanding Living Benefits

Living benefits are features attached to some life insurance policies that allow you to access a portion of your death benefit while you're still alive. This can be a lifeline if you're diagnosed with a qualifying terminal, chronic, or critical illness. Instead of waiting for the policy's death benefit to be paid out, living benefits provide financial support when you need it most, helping cover medical expenses, treatments, or even daily living costs. These benefits are typically paid out tax-free and can offer peace of mind during challenging times.

Accelerated Death Benefit

An accelerated death benefit is a life insurance policy provision that lets you access a portion of your death benefit while you’re still living. This benefit is typically available if you’re diagnosed with a terminal illness and have a life expectancy of 24 months or less. The amount you can access varies by insurer but is usually a percentage of the death benefit. You can use the funds for anything you choose, such as medical expenses, living expenses, or even a bucket-list trip. Keep in mind that accessing an accelerated death benefit will reduce the death benefit your beneficiaries receive.

Chronic Illness Rider

A chronic illness rider is an optional add-on to a life insurance policy that provides accelerated death benefits if you're diagnosed with a qualifying chronic illness. This rider can offer financial protection and peace of mind if you have a chronic health condition. It typically allows you to access a portion of your death benefit while you're still alive to help cover expenses like medical bills, long-term care, or daily living costs. The specific terms and conditions of a chronic illness rider, including the definition of a qualifying illness and the percentage of the death benefit accessible, can vary depending on the insurance company and policy.

Feature	Living Benefit Rider	Traditional Death Benefit
Access funds while alive	✅ Yes	❌ No (except for policy loans)
Purpose	Cover costs related to chronic, critical, or terminal illness	Provide financial security to beneficiaries upon death
Trigger Event	Diagnosis of qualifying event	Death of the insured

Long-Term Care Rider

A Long-Term Care Rider is an optional add-on to a life insurance policy that provides financial support if you need extended care. This rider lets you access a portion of your death benefit to cover costs associated with assisted living, nursing homes, or in-home care. This can be invaluable in protecting your savings from the high costs of long-term care.

It's important to remember that using the rider's benefits will reduce the death benefit payout from your life insurance policy. Carefully consider your needs, financial situation, and the specific terms of the rider before adding it to your policy.

Not Cash Value or Withdrawals

This is not a cash value account. You can’t make withdrawals from this account. Funds in this account are not insured by the Federal Deposit Insurance Corporation (FDIC).

Choosing Living Benefits

Living benefits offer financial protection if you experience a qualifying event that impacts your health. When choosing living benefits, carefully consider the types and severity of events covered. Some policies may cover critical illnesses like cancer or heart attack, while others might include chronic illnesses or long-term care needs. Evaluate the coverage amounts and payout structures to ensure they align with your financial obligations and potential expenses. Additionally, understand the waiting periods and benefit durations associated with each option. Assess your personal health history, family medical background, and financial situation to determine the most appropriate coverage for your needs.

Consulting a Financial Advisor

Consulting a financial advisor can provide personalized guidance and expertise to help you make informed decisions about your money. A financial advisor can assess your financial situation, identify your goals, and develop a tailored plan to achieve them. They can offer advice on a wide range of financial matters, including investing, retirement planning, taxes, and insurance. When choosing a financial advisor, consider their credentials, experience, and fees. It's important to find an advisor who you trust and who understands your unique financial needs. Remember that financial advisors are there to provide guidance, but ultimately, the decisions about your money are yours to make.