While life insurance is designed to benefit your loved ones after you pass away, it also helps them and you before that time comes by way of something known as living benefits.
Living benefit options for term life include:
- Accelerated death benefits: This benefit pays out a portion of your term life policy if you ever face a terminal illness and gives you needed cash to cover any medical, debt, or other expenses. A variation on this option is called a critical illness rider that lets you access your death benefit if a specific ailment or disease afflicts you.
- Return of premium: This benefit provides for all the premiums you paid during the term to be returned to you so long as you don't pass away during the term.
- Disability waiver of premium: This benefit lets you skip your premium payments in the event you suffer from a long-term disability lasting six months or more. While not a true cash benefit, it's still a valuable option.
Living benefit options for permanent life include:
- Death benefits: This insurance offers similar benefits as term life insurance but includes an additional ability to accumulate cash value on a tax-deferred basis.
- Cash value withdrawal: This benefit provides you access to a portion of the cash value of your permanent life policy. There are tax implications to be aware of depending on the amount withdrawn, and the amount withdrawn will be subtracted from the policy's death benefit if not repaid.
- Policy loan: You'll be charged interest if you take out a loan against your permanent life policy, but it's usually lower than the interest charged by more traditional lenders.
- Long-term care benefits: Adding a long-term care benefit to your permanent life policy lets you tap into the death benefit to cover long-term care expenses that your health insurance doesn't cover. It's a valuable living benefit to have when you consider that 70% of people turning 65 today will need some form of long-term care in their lives.
There's a need for life insurance at any age and stage of life, but it's important to select the right policy. Call us to discuss the options available and the best selection for your situation.
This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.
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