Life insurance with living benefits
Even if you buy from the greatest businesses, purchasing life insurance can be weird. After all, why would you pay for something that you will not use until after you die? Of course, to safeguard your loved ones.
However, you do not have to pay into a policy that will not benefit you at all over your lifetime. With living benefits, you can use some features of your coverage while you are still alive. What are the life insurance policies' living benefits? And should you include them in your coverage?
What are the living benefits of life insurance?
Living benefits are exactly what they sound like: advantages in a life insurance policy that can be used while you are still alive.
Some life insurance contracts include living benefits, however many must be added as a rider to the policy. These riders frequently provide additional coverage, but you must pay an additional premium to incorporate them in your policy.
Not all living benefits function in the same way. Some of the most frequent alternatives can help you decide if life insurance with living benefits is correct for you.
Types of life insurance living benefits
Various life insurance policies provide a variety of living advantages. Some of the most frequent types of living benefit alternatives are shown below.
Cash value
If you choose a permanent life insurance policy rather than a term policy, a portion of your premiums will be deposited into an account that will accumulate cash value over time. Depending on the sort of permanent policy you have, that money may be invested to grow quicker or may yield a consistent rate of interest.
Regardless, you can use the cash value while you are still alive. If you have enough money, for example, you can use it to pay your premiums.
Alternatively, you can borrow against your cash value. You must reimburse the money as well as any applicable interest, or it will be removed from your death benefit.
Finally, you can entirely surrender your policy and receive your cash value as a flat amount. If you choose this option, you will forfeit your death benefit and any other life insurance living benefits related to your policy.
Your policy may have limitations on how and when you can use the cash value. For example, you may have to wait a specific number of years after purchasing your policy before you may collect the cash value.
Accelerated death benefit riders
An accelerated death benefit rider, also known as a critical illness or terminal disease rider, can be added to both permanent and term plans.
If you purchase life insurance with an accelerated death benefit rider, some qualifying occurrences will allow you to obtain a portion of your death benefit before you die. For example, if you are diagnosed with a terminal illness or a permanent disability, you may be eligible for accelerated death payments.
Using expedited death benefit riders reduces your policy's death benefit. You can use the money whenever your family requires it, but any death benefits you accept early lower the amount your beneficiaries receive after you die.
Other types of living benefits
Life insurance policies can be enhanced with other types of living benefits. Although this is by no means an exhaustive list, life insurance companies regularly offer these supplementary riders.
- Return of premium riders: If you do not die before your term insurance expires, you will not receive any policy payout unless you have this rider. You will pay extra for a term policy with this choice, but if you do not die before the term finishes, you will receive your premiums back.
- Disability waiver of premiums rider: If you are diagnosed with a long-term disability (typically lasting six months or more), you will not be required to pay your premiums for the duration of the disability.
- Long-term care benefits rider: This living benefit rider, which is often reserved for permanent plans, allows you to spend a portion of your death benefit to cover the cost of long-term care.