Even if you purchase from one of the best companies, buying life insurance can be a daunting task. Why would you spend money on something that won’t be of any use after your death?
Protecting your loved ones is a must.
You don’t necessarily have to pay into a policy you won’t use during your lifetime. You can still take advantage of certain aspects of your policy through living benefits. What are the benefits of life insurance policies that have living benefits? Are they worth adding to your existing coverage?
What are the living benefits associated with life insurance?
Living benefits are exactly as they sound: Benefits in a life insurance policy you can use while you’re still alive.
Although some life insurance policies include living benefits, many of these must be added to your coverage with a rider. You will need to pay an additional premium to include these riders in your policy.
All living benefits are not created equal. These are some of the most popular options to help you decide if you need life insurance with living benefits.
Different types of life insurance benefits
Many types of living benefits are available with different life insurance policies. Here are the most popular types of living benefits.
Cash value
A permanent insurance policy will allow you to save a portion of your premiums. This is in addition to the term policy. The cash value will grow over time. The type of permanent policy you choose will determine if the money can be invested to grow more quickly or earn interest at a steady pace.
You have the option of using that cash value while you’re still alive. You can, for instance, use the money to pay your premiums if you have enough.
You can also borrow your cash value. The money will have to be repaid along with any interest, or it will be taken from your death benefit.
You have the option of completely giving up your policy and receiving your cash value in a lump sum. You will lose your life insurance benefits and your death benefit to your beneficiaries if you exercise this option.
You may have restrictions about when and how you can access the cash value of your policy. You may need to wait for your policy to expire before you can access the cash value.
Riders for Accelerated Death Benefit
You can add an accelerated funeral benefit rider to either permanent or term policies.
Certain qualifying events can allow you to receive some of your death benefits if you have life insurance with an accelerated death benefit rider. You might be eligible for accelerated death benefits if your terminal illness or permanent disability is diagnosed.
Your policy’s death benefit will be lower if you use accelerated death benefit riders. While you can still use the money for your loved ones, any death benefits that you take before your death will affect the amount your beneficiaries receive upon your death.
Additional benefits to living
Additional living benefits can be added to life insurance policies. These additional riders are often offered by life insurance companies, even though this is not an exhaustive list.
- Premium riders return: If you die before the policy expires, there will be no payout unless this rider is purchased. This option will cost you more, but you will get the premiums you paid back if you don’t die before the term ends.
- Premium waiver for long-term disabilities: This optional rider allows you to waive your premiums if your disability continues.
- Long-term Care Benefits Rider: This living benefit rider, which is normally reserved for permanent policies allows you to use some or all of your death benefit to pay for long-term care.
Questions frequently asked
What is the cost of life insurance?
There are many factors that affect the cost for life insurance. Your individual features such as your age, health, and hobbies will affect the amount you pay. A term policy will usually cost you less than a permanent policy. Your premium can be increased by adding riders, such as the living benefit riders, discussed above.
Do I need a policy that provides living benefits?
It all depends on your budget, your needs and what you can afford. Your risk tolerance and ability to pay more will determine the living benefits that you choose to add. You and your loved ones will have more options for using the policy while you’re still alive if you have higher life insurance living benefits. Those extra protections can often lead to higher premiums.
Are life insurance policies with living benefits worthwhile?
You may be able to pay for life insurance benefits that you don’t use. There is also the possibility that you might be diagnosed with a serious illness, or become disabled and wish you had purchased the additional coverage.
Talk to a life insurance broker or agent to help you decide whether living benefits are right for you.
