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111621 What are living benefits of life insurance?

While life insurance generally benefits your loved ones after you

pass away, it can also benefit them (and you) before that time

comes through something known as living benefits.

 

Term Life Living Benefits

 

Term life insurance covers you for a set amount of time, or term.

It provides funds to your beneficiary (or beneficiaries) if you pass

away during that time.

Living benefit options for term life include...

 

Accelerated death benefits. This living benefit pays out a portion

of your term life policy if you ever face a terminal illness. This gives

you needed cash to cover medical expenses, debt and more. Many

people also use the funds to take a dream vacation or make other

memories with their loved ones. Here are four things in mind when

it comes to this living benefit…

Different insurers have different life expectancy timelines for when

you can access the cash.

The policy may need to be in force for a certain amount of time

before you can access the living benefit.

You may be charged interest on the portion of the accelerated death

benefit that you use.

The advanced amount is typically subtracted from the total amount

your beneficiaries receive after you pass away.

A variation on this option is called a “critical illness rider” that lets you

access your death benefit if you’re afflicted by a specific ailment or

disease.

Return of premium. With this living benefit, all the premiums you paid

during the term are returned to you so long as you don’t pass away

during the term. You typically pay more for this kind of policy than you

would for a traditional term life policy.

Disability waiver of premium. This living benefit lets you skip your

premium payments in the event you suffer from a long-term disability

for six months or more. While not a true cash benefit, it nonetheless is

a valuable option to have since there’s a three in 10 chance you’ll face

a disability that keeps you out of work for 90 days or longer at some

point during your working career.

 

Permanent Life Living Benefits

 

Permanent life insurance (whole life) has a death benefit like term life

insurance, along with the ability to accumulate cash value on a

tax-deferred basis, which a term policy does not.

Some permanent life insurance policies give you the option of

accelerated death benefits like term life insurance does.

Permanent life insurance lets you tap into needed funds throughout

your lifetime in four other important ways as well:

Cash value withdrawal. A withdrawal lets you access a portion of

the cash value of your permanent life policy. You won’t owe any taxes

on this withdrawal if the amount you withdraw is less than or equal to

your premium payments. However, you will owe taxes if any portion

of the amount you withdraw is from interest, dividends or capital gains.

Also be aware that the amount you withdraw will be subtracted from

the policy’s death benefit if it’s 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 other lenders. You also won’t have to undergo a credit

check or abide by a long list of restrictions.

Policy surrender. A policy surrender is when you cancel your

permanent life policy to access the cash value portion as a one-time

lump sum. The insurer will give you that amount, less any outstanding

loans and/or unpaid premiums.

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.

The death benefit is typically reduced by the amount of the long-term

benefit that you use. It’s a valuable living benefit to have when you

consider that 70 percent of people turning 65 today will need some

form of long-term care in their lives.

 

Learn More About Living Benefits of Life Insurance

 

A licensed insurance agent can help you explore living benefits of

life insurance and answer any other questions you have.

 

The key is to start today.

 

Hayden Childs

Alabama Licensed Agent

(205) 269-1382

Shcmail34@yahoo.com

www.haydenchilds.net

 

 

https://lifehappens.org/life-insurance-101/what-are-living-benefits-of-life-insurance/

 



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