Living Benefits

Living Benefits, also known as Accelerated Benefits, is the portion of the death benefits that could be used while being alive. Living Benefits tend to associate with permanent life insurance. Nowadays, Term life policies can also be purchased with any other living benefits excluding cash value. The purpose of the living benefits is to allow policyholders to accelerate benefits in case of serious illness/injury, chronic illness, or terminal illness depending on the insurance company providing the policy. Policyholders elect to accelerate benefits prior to death under the form of Cash Value, Terminal illness, Chronic illness, and critical illness/injury.

Cash Value 

Cash value is the money that grows inside of your permanent life insurance policy. The best way to build cash value is to remit payments more than the scheduled premium. Part of your premium is being set aside into a savings account, which your insurance company will deposit dividends into as an interest payment. Once built up, you can access it at any time as long as enough of it is built to cover the surrender charges. To access the cash value, you can borrow against it or surrender the policy.

• You can make partial withdrawals. If the money is not repaid, the withdrawals will reduce the policy’s death benefit — the beneficiary will receive the difference. The money can also be used to pay premiums once the cash value reaches a high enough level.
• Borrow against the cash value. You can take out loans. You’ll have to repay them to maintain the death benefit. Interest is charged on loans with rates varying per insurer. However, the repayment is on your agreed terms and timeframe.
• Withdraw all the cash value and surrender the policy. This will end the life insurance coverage, and in the early years, you will pay a surrender fee to the insurance company.

Terminal Illness 

Terminal illness gives you the option to accelerate a portion of your death benefits if you’re diagnosed as terminally ill and will result in death within 12 months (24 months in some states). Most life insurance companies offer terminal illness, whether in term or permanent life, at no additional charge.

You will need to get a certificate of illness from your physician to confirm it. Most insurance companies allow you to access up to 90 percent of your death benefit while living to take care of your most important worries or to ensure that your family is financially settled.

Critical Illness/Injury 

Critical illness/injury is another option that provides early access to accelerate your death benefits for medical treatment of certain illnesses specified in the policy. Those specified illnesses are either terminal diseases or chronic illnesses that will require continuous care over an extended period. Enumerated diseases often include illnesses such as heart attacks, strokes, paralysis, traumatic brain injury, blindness, and cancer.

Critical illness/injury benefits pay for anything you choose—the proceeds are paid directly to you and there are no spending limits. Therefore, you can use the proceeds to pay for basic living expenses that aren’t related to medical care. Typically, the accelerated benefit is a percentage of the available death benefit and you can access up to 90 percent base on the insurance company.

As with any other living benefits, withdrawal of the entire accelerated benefit will result in policy termination. However, if you choose to receive only a portion, the policy will carry on and pay the eventual death benefit in addition to the accelerated benefit. If you’re fortunate enough to never need the accelerated benefits, beneficiaries will eventually receive the full death benefit after your passing.

Chronic Illness 

Chronic illness gives you a way to tap into your death benefits while still alive. To qualify for it, you must be diagnosed with a qualifying condition and may need to meet certain requirements like being unable to perform at least two of the six daily living activities ( bathing, continence, dressing, eating, toileting, and transferring) for a certain period without substantial assistance from someone else. Just like Critical illness/injury, to be eligible for this rider, a physician must certify in writing that you are chronically ill.

Having a chronic illness rider to your life insurance contract can provide extra financial security if you’re worried about being unable to support your family if becoming ill. Its main purpose is for you to be able to live more comfortably, afford better medical care, and get access to long-term care to offset the care costs of a severe cognitive impairment.

The accelerated benefit can be used for expenses such as nursing home or home health care. It can also

Waiver of Premium (WP) 

Waiver of premium is another optional living benefit that can be used only if you become totally disabled. If a total disability occurs, the remaining premium charges will no longer be required to be paid, but the policy will remain in force for the length of term that the policy was written for.

Waiver of premium helps prevent your life insurance coverage from lapsing if you become incapable of continuing payments. Instead of using your limited funds to pay your premiums so your life insurance policy remains active, you can use the money you have toward living expenses and much-needed healthcare.

The waiver of premium rider does cost extra per month and usually contains a waiting period during which there can be no claim of benefits. Both the additional premium for the waiver of premium rider and the waiting period varies based on your insurance company.