Why Living Benefits Are Important?
In the past several years, some life insurance companies have created living
benefit riders on their term and permanent products. The value of living benefits
is so important these days as we live longer. The old adage that you have to die to
collect is not true anymore. Statistics show that insurance companies pay out
more in living benefits than they do in death benefits.
Most people buy life insurance so that their loved ones have financial security
when they die. Life insurance has always provided peace of mind for millions of
families. But what if you could tap into the death benefit today to pay your bills
should the need arise?
No one likes to think about dealing with a serious illness. Most of us rationalize it
by thinking it could never happen to us. Unfortunately, the truth is that it is fairly
common. Close to 40% of people will be diagnosed with cancer in their lifetime.
There is also a 70% chance that the average 65-year-old will need long term care
services, according to the U.S. Department of Health and Human services.
What Are Life Insurance Living Benefits?
Living benefits come in the form of no-cost riders on a life insurance policy. Living
benefits essentially allow the insured to access money from their policy’s death
benefit while they are still alive. These funds can be used to pay your living
expenses while you deal with your illness. They can be used to pay your
mortgage, credit cards, medical care, hospice, nursing home care or in-home care.
Let’s look at these lifesaving benefits:
Chronic illness: This rider applies if you are diagnosed with a chronic illness that
prevents you from performing at least two of the six “activities of daily living”
(ADL’s). These are bathing. eating, getting dressed, toileting, transferring and
continence. For example, Guillain Barre Syndrome and peripheral neuropathy
now strikes 1 in every 100,000 people each year. In the 1980’s, it was 1 in every
1,000,000. Severe illnesses strike people more than we would like to think.
Critical Illness: Examples include heart attack, stroke, and kidney failure.
Terminal Illness: If your doctor informs you that you have 12 months or less to
live, this rider allows you to live a full life with your family until you pass away.
One of my clients fulfilled a lifelong dream of taking her family on a
Mediterranean cruise. She gave her family a memory to cherish instead of
thinking mom is going to die.
Long-term Care: This rider allows you to access living benefits if you need care
whether it is at home or in a facility.
To access one of the living benefits, you will need your doctor to complete a claim
form. The insurance company will then get your medical records to verify the
claim. You may receive a lump-sum benefit or a monthly income, or both.
One of my doctor clients was diagnosed with inoperable pancreatic cancer five
months after his policy was issued. He received a lump-sum check in the amount
of $68,000 in November, 2022. Then in January, 2023, he is receiving $12,770 a
month for 12 months. In January, 2024, his doctor will have to complete another
claim form. This money saved his financial life as he had to close his practice.
Living benefits allow a person to live with dignity as they deal with these life-
altering illnesses.
