The safety net you can use now: Why adding living benefits to your life insurance is a smart move
Most people think life insurance is a financial tool for their family after they pass away. While this is a core function, the reality is that life can bring a host of unexpected challenges while you are living. Therefore, living benefits allow you to access your policy’s funds while alive. This helps transform the way people view and use life insurance.
The link below is a testimony from those who purchased Living Benefits. https://www.youtube.com/watch?v=rGOZEEFI1FQ&list=PLlt1Nwaq7kcirg2c2VVbejzLTcQtyJFJc
Below, lets take a closer look on adding living benefits to your life insurance policy. As this can provide peace of mind and financial flexibility when you need it most.
What are living benefits?
Living benefits may be optional features with some policies. Depending on the provider, living benefits may be come with no additional cost. Other insurance providers offer a rider, added to life insurance policies for an extra cost. These riders are accelerated death benefits used under specific circumstances. The money you receive is typically not restricted to medical expenses. These funds may cover a wide range of costs.
Types of living benefits
Here are some of the most common living benefit (LB) riders available:
- Accelerated Death Benefit (ADB) Rider: A rider allows access to a portion of your death benefit. For a diagnosis with a terminal illness and have a limited life expectancy. For example, this would be 12 to 24 months of life. So, this can help cover end-of-life care, medical bills, or other expenses during this difficult time.
- Critical Illness Rider: Provides a lump-sum payment if you are diagnosed with a specific life-threatening condition. Examples are a heart attack, stroke, major organ transplant, or invasive cancer. These funds can help you pay for treatment and other financial needs.
- Chronic Illness Rider: Covers a chronic illness that prevents you from performing a certain number of daily living activities (ADLs). Bathing, dressing, or eating, are examples that this rider provides access to your death benefit. The money can be used for things like in-home care or long-term care facilities.
- Waiver of Premium Rider: This rider ensures that if you become disabled and are no longer able to work, your premiums will be waived. This keeps your policy in force without you needing to pay, so you can focus on your recovery.
- Return of Premium Rider: If you outlive your term life policy, this rider refunds some or all of the premiums you paid over the course of the term. This can increase the cost of your policy. However, it can provide peace of mind that your investment won’t be lost if you don’t use it.
- Cash Value (in permanent policies): Permanent life insurance policies build cash value over time. You can access this cash value through withdrawals or loans. These funds can pay expenses, supplement retirement income, or cover emergencies. However, loans accrue interest and both withdrawals and loans will reduce the death benefit if not repaid. After a certain period, typically 11-15 years, some policy loan interest rates may become a wash loan with credits applied by the insurance company.
The key benefits of living benefits
- Financial security during a health crisis. Major illnesses can lead to mounting medical bills, loss of income, and other expenses. These costs can quickly deplete your savings. Living benefits offer the financial support you need without going into debt or using money from other assets.
- Increased peace of mind. The option to use your policy while you are still alive is important. This option can reduce anxiety and stress that come with a serious diagnosis. Therefore, you can focus on your health and recovery rather than worry about financial matters.
- Flexibility in a changing life. Life is unpredictable. With LB, your life insurance policy becomes a versatile tool. Allowing you to adapt to changing circumstances. Funds can pay for medical treatments and cover long-term care costs. Also, cash value can supplement your retirement income.
- Covering care that health insurance may not. Living benefits can help pay for care not typically covered by health insurance or Medicare. Long-term care needs continue to rise, so this can be a crucial feature of your financial plan.
Potential drawbacks
While living benefits offer many advantages, they are not without some trade-offs:
- Reduced death benefit: Money received from a living benefits rider is an advance on your death benefit. Meaning the amount your beneficiaries receive after you pass away will be reduced. Depending upon your policy, LB’s may be a Lien method or a discounted method for benefit payments. There may be a risk with the discounted method of your policy. Here’s a link explaining these two methods. https://www.westernsouthern.com/-/media/files/columbuslife/cl5218110dmlienmethod.pdf
- Higher premiums: Adding living benefit riders to your policy may or may not increase your premium costs. The link above shows that LB are included at no extra cost in this policy. You need to weigh this added expense against your financial needs and peace of mind.
- Tax implications: The payout from LB may be taxable, depending on the specific circumstances and how the funds are used. Please consult your financial professional or tax advisor.
How to decide if living benefits are for you
Choosing life insurance with LB is a personal decision based on your financial situation, health, and family history. If you’re concerned about financial assistance for critical or chronic illness, then these riders may be worth the investment. http://melfinservices.com/retirementplanning
For those with a higher risk tolerance or sufficient savings, a basic policy may be sufficient. However, added security and flexibility that LB’s provide can be invaluable. Especially, when facing life’s unexpected challenges. By understanding the options, you can choose a policy that protects your loved ones and supports you throughout your life.
