Life Insurance With Living Benefits: Is It Worth the Cost?
Written by
Laura Beck
Edited by
Nicholas Morine
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Most people buy life insurance for one reason — to make sure their loved ones are taken care of financially if the insured passes away. But did you know some life insurance policies can actually provide a cash injection while the insured lives? It’s a feature called “living benefits” and it’s becoming an increasingly popular add-on.
But is life insurance with living benefits worth the cost? Let’s find out.
The Basics on Living Benefits
Living benefits, also called accelerated death benefits, allow you to access a portion of your life insurance policy’s death benefit before you die if you are diagnosed with a qualifying illness or condition. It’s essentially an early payout to help cover the enormous costs that can come with serious medical issues.
The most common living benefit riders include:
- Terminal illness: If you are diagnosed with a terminal condition and given a life expectancy of 24 months or less, you can take an advance on the death benefit to pay for end-of-life care, medical bills, etc.
- Chronic illness: Covers you if you can no longer perform basic daily living activities like bathing, eating, getting dressed on your own, etc. due to an illness or disability.
- Critical illness: Provides funds if you’re diagnosed with a specified critical condition (cancer, heart attack, stroke, organ failure, etc.) to help with treatment costs.
- Long-term care: Allows you to use the death benefit to pay for long-term care like nursing homes, assisted living facilities or in-home health aides.
A Living Benefit Reality Check
The truth is that many Americans will face cancer at some point, and the majority of senior citizens will require long-term care services, per Forbes. The significant costs of healthcare and care facilities can quickly bankrupt even diligent savers.
That’s why having access to living benefits through life insurance could be vital. Imagine being able to receive an advance cash payout of $100,000, $250,000 or more from your policy to afford chemotherapy, surgery, nursing home stays or live-in care providers. That kind of cash flow could mean the difference between inadequate care and getting the treatment one truly needs.
What’s the Catch?
Some policies bundle certain basic living benefits automatically at no extra cost. But more often, adding a living benefit “rider” to access funds for chronic, critical or long-term care will make your premiums more expensive. You’re essentially paying more up front for that added protection down the road.
Thanks!
So you’ll need to weigh if the added premium is worth it based on your current health, family medical history and financial situation. Just know that if you do opt for living benefits, you’ll likely have a cash reserve waiting if you get hit with a major medical crisis later in life.
A Smart Way to Truly ‘Self-Insure’
While easy to overlook, living benefits turn life insurance into a flexible tool that’s beneficial to many. With the ability to take an advance on the death benefit for major medical costs or long-term care, your life insurance can help ensure you’re taken care of when life gets difficult. Yes — it means paying higher premiums in some cases, but having access to that cash payout down the road when you need it most could prove worthwhile.
