Buying a life insurance policy can be a confusing process, there are dozens of different kinds and plans to choose from. Additionally, there are different advantages that you’ll need to consider. It can be hard deciding which one is best for you.
When purchasing life insurance, our natural inclination may be to focus on the “death benefit” of our investment. Whether we purchase a term policy or a permanent policy, we do so to ensure that we do not leave a financial void in the unfortunate event of our passing. Did you know that some companies offer living benefits on a life insurance policy? “Living benefits” are benefits of life insurance policies that you can take advantage of while you are alive.
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Exactly What Are Living Benefits On A Life Insurance Policy And How Do They Work?
Living benefits can refer to what is known as an accelerated death benefit for a term or permanent life insurance policy. This benefit is included in many insurance policies or can sometimes be added to your policy as a ‘rider’. A rider is additional coverage that can be purchased separately and added to your life insurance policy and is a common way for clients to personalize their life insurance plan. The accelerated death benefit allows a client to access, or accelerate, part of the death benefit of their policy to meet expenses stemming from a qualifying chronic, critical or terminal illness, depending on your insurance carrier’s policy. If you are 43 years old and get blindsided by a critical illness such as a cancer diagnosis, you could accelerate $100,000 of a $300,000 policy to help pay for medical expenses and make-up for lost income. If you are 75 and facing a chronic illness, you may accelerate a portion of your death benefit to help pay for long term care. The accelerated death benefit of your policy is there so that in the event of these unfortunate medical situations your family will be prepared for the unexpected expense and lost income that accompany the grief and heartache they must endure.
Living benefits also refer to the cash value benefits of a permanent life insurance policy. These benefits can transform your life insurance plan from merely a risk protection expense into a valuable financial asset that also has a death benefit. When you pay your premium on a permanent life insurance policy, part of your premium is allocated for insuring your life, the ‘death benefit’, and part goes toward building cash value, the ‘living benefit’. Term life insurance, on the other hand, provides a death benefit if the insured dies within the term of the policy but does not have any of the cash value provisions of permanent life insurance.
One of the most popular advantages of permanent life insurance and the cash value it accumulates is the ability to borrow money against that cash value. Your present financial position is not considered; there is no credit check or approval process. Insurers do often require the cash value of an insurance policy to reach a certain level before you can borrow against it, commonly this will take around 10-15 years. An important thing to know about these cash value loans is that they do not reduce the cash value of your policy. You borrow money from the insurance company and the cash value is the collateral. These loans do accumulate interest and if left unpaid until you die, the outstanding balance will be deducted from the face value of your policy. For example, if you borrowed against your policy with a face value of $200,000 for an emergency expense and the loan and interest total is $40,000 when you die, then the beneficiaries of your policy would receive $160,000. When taking out life insurance loans, you must weigh your need for cash now against your beneficiaries need for your policy’s death benefit in the future.
Making a withdrawal from your cash value balance is an option that many use, sometimes in combination with loans against that cash value, to help pay for their children’s college education. The death benefit of a permanent life insurance policy is needed, at least in part, to ensure that funds are there for your children’s college education if you are to die prematurely. But, statistically speaking, you will see your children well past their college years. With these cash value options you can still use your policy to help fund your children’s college expenses. An added benefit is that the cash value of a permanent life insurance policy is not considered as an asset when applying for federal financial aid. You can borrow against (or make a withdrawal from) that cash value to pay for tuition, books and other college expenses while not reducing the amount of federal financial aid available to your child.
Dividend payments are a living benefit of many permanent life insurance policies. Though they are not guaranteed, these are payments to policy holders based on company profitability. You often have a variety options to expend your dividend payments such as taking them in cash, repaying any policy loans you may have, reducing your premiums or purchasing additional insurance. These annual dividends may be reduced if there is an outstanding loan against your policy.
Finding The Most Affordable Whole Life Plan
The living benefits of life insurance policies can be a life-saver in extreme situation. There are countless scenarios that you could take advantage of these benefits. Because these plans are a part of whole life plans, it’s important that you find the most affordable permanent life insurance plan.
As we’ve mentioned, whole life insurance plans are an excellent form of life insurance protection, but because of all of the benefits of these plans, they are going to be more expensive than term plans. While they are more expensive, you can’t put a price tag on the peace of mind that having a life insurance plan will bring. There are several ways that you can get more affordable life insurance protection for your family.
The first thing that you should do is cut out the cigarettes or chewing tobacco. IF you’re listed as a smoker on your whole life insurance plan, you can expect to pay much higher insurance premiums. Smokers are going to pay around twice as much for their life insurance plan versus what a non-smoker is going to pay for the same plan. If you want to get the most affordable life insurance plan, you’ll need to cut the tobacco once and for all.
The next changes that you should make is to stick to a healthy diet and start exercising. This is going to help you lose any extra weight, lower your cholesterol, and drastically lower your chances of being diagnosed with severe health complications. Both of these can help you get much better results from the medical exam, which is going to mean lower rates for the plan. It’s time to lace of those running shoes and hit the gym. It could save you hundreds of dollars on your life insurance plan.
The best way to ensure that you’re getting the lowest insurance premiums is to work with an independent insurance broker. Unlike a traditional agent, our agents can help you find the best plan to meet your needs. We work with dozens of highly rated companies across the nation.
There are thousands of different life insurance companies on the market, which means that you could spend weeks and weeks looking for the best plan to meet your needs. Our agents can bring you the best rates instantly. We can help save you both time and money on your life insurance application process. It’s our mission to ensure that you’re getting the best plan possible.
If you have any questions about life insurance or about living benefits with your plan, please contact one of our agents today. We would be happy to answer those questions and ensure that you’re getting the best plan possible.
You never know what’s going to happen tomorrow, which means that you shouldn’t wait any longer to get the life insurance protection that your family deserves. If something tragic were to happen to you, or you need living benefits and you don’t have a plan in place, you could leave your loved ones with a massive amount of expenses and debts. We can make the process as quick and straightforward as possible.
Most of us consider the quality of life we provide for our family to be our most important responsibility. The living benefits of life insurance policies can be an important part of fulfilling this responsibility, in addition to providing a death benefit if the worst were to occur. Getting started toward the peace of mind a quality life insurance plan can provide is simple. Use the term quoter on this page to get your free quote or give us a call at 1-800-712-8519. We can help guide you in this important decision and structure a life insurance plan that is right for you and your family.
Frequently Asked Questions
What are living benefits in a life insurance policy?
“Living benefits” are benefits of life insurance policies that you can take advantage of while you are alive. An independent life insurance agent can help explain them to you.
How can I use the living benefits of my life insurance policy?
One living benefit is an accelerated death benefit. It allows a client to access, or accelerate, part of the death benefit of their policy to meet expenses stemming from a qualifying chronic, critical or terminal illness, depending on your insurance carrier’s policy. EX: If you are 43 years old and get blindsided by a critical illness such as a cancer diagnosis, you could accelerate $100,000 of a $300,000 policy to help pay for medical expenses and make-up for lost income.
What is an example of a living benefit in a life insurance policy?
Living benefits also refer to the cash value benefits of a permanent life insurance policy. When you pay your premium on a permanent life insurance policy, part of your premium is allocated for insuring your life, the ‘death benefit’, and part goes toward building cash value, the ‘living benefit’. Term life insurance, on the other hand, provides a death benefit if the insured dies within the term of the policy but does not have any of the cash value provisions of permanent life insurance.