Life insurance policies with living benefits allow you to access some of the death benefit while you’re alive using optional add-ons called riders.
Living benefits pay out some portion of your death benefit if you are diagnosed with a qualifying terminal or critical illness.
Though using your living benefits reduces the cash benefit your beneficiaries receive, it can help you cover high end-of-life medical costs so that your loved ones don’t have to.
Living benefits give you the option to use some of your life insurance proceeds while you’re alive.
You can only use the funds for end-of-life care and only if you have a qualifying health condition, like a terminal illness.
Living benefits are usually provided through optional policy add-ons called riders.
What are life insurance living benefits?
Life insurance with living benefits is a type of life insurance policy that has riders that allow you to withdraw from your policy’s face value. The withdrawn funds can be used for any purpose. These are sometimes called living benefits riders or accelerated death benefit riders.
Some living benefits riders may be included automatically in your life insurance policy at no additional cost. For example, terminal illness rider, which is a type of accelerated death benefit (ADB) rider, allows you withdraw from your death benefit if you’re diagnosed with a terminal illness.
Other living benefits riders can be added for an additional expense, like a long-term care (LTC) rider, which pays for care if you can no longer care for yourself. Sometimes a life insurance policy with a long-term care rider is called hybrid long-term care insurance.
If you don’t have the funds to support your end-of-life care, living benefits may help protect your family from becoming responsible for those costs.
Using your benefits will reduce the lump-sum payment intended for your beneficiaries, so you’ll need to decide how much of the money to use.
How much does life insurance with living benefits cost?
The cost for a life insurance policy with living benefits depends on the cost basis you’re given after underwriting and which riders you add to your policy. Term life insurance premiums vary based on your age, health, medical history, coverage amount, and more.
A 35-year-old non-smoker without any complex health concerns could pay as little as $25 to 30 per month for a $500,000, 20-year term insurance policy with an included terminal illness rider. That same person would pay significantly more if they added a long-term care rider.
→ Learn more about life insurance rates
What are the different types of living benefits riders?
You can use the funds from your living benefits rider to pay anything, including end-of-life expenses like hospice care, nursing home care, and in-home caretakers.
Some riders are free, while others may require an additional premium. These are the most common living benefit riders.
Accelerated Death Benefit (ADB) Riders:
Terminal illness rider: This is often automatically included in your policy. To qualify, you’ll need to have a terminal diagnosis with a life expectancy from 6-24 months (the exact timeline varies by insurer).
Chronic illness rider: Gives access to your benefit if a chronic illness prevents you from performing at least two of the six Activities of Daily Living (ADL) — eating, bathing, getting dressed, toileting, transferring, and continence.
Critical illness rider: Covers qualifying critical illnesses that come with high medical costs and shortened life expectancy, such as ALS, heart attack, kidney failure, life-threatening cancer, and stroke.
Long-term care (LTC) rider: Disburses some death benefit only for long-term care expenses if you can no longer perform at least two ADL. Life insurance with an LTC rider is costly.
Each of these riders have some restrictions on who qualifies and how much of the death benefit you’re able to access. Instead of being paid in a lump sum, you’ll get living benefits on an as-needed basis.
Does cash value life insurance have living benefits options?
Living benefits typically refers to living benefits riders. However, cash value funds found in permanent life insurance are sometimes categorized as living benefits.
Some permanent insurance features allow you to access your cash value while you’re alive, but not your death benefit:
Paid up additions: Additional coverage purchased with accumulated cash value funds.
Policy loans: Loans taken against your account using the cash value as collateral. The loans can be used for any purpose.
Policy surrender: Giving up your policy in exchange for any cash value. You’ll lose insurance protection and may have to pay taxes and fees.
Premium payments: Universal and variable life insurance policies allow you to use your cash value to pay your premiums.
Permanent life insurance is not the best way to get living benefits, since cash value interest rates are relatively low and premiums are five to 10 times higher than term life rates. To pull cash from your policy’s death benefit, you’ll still need to use a rider.
End-of-life care is costly, but living benefits can provide some financial relief to you and your family in your final days. Working with an independent insurance agent at Policygenius can help you find a life insurance policy with the living benefits you need.
Frequently asked questions
What are living benefits for life insurance?
Living benefits are additional features for your life insurance policy that allow you to use some of your death benefit to pay for end-of-life care before you die.
Which type of life insurance provides living benefits?
Both term and permanent life insurance comes with the option to add living benefits riders to your policy. The details of any living benefits associated with your life insurance policy will be clearly laid out in the policy documents.
Do you need life insurance with living benefits?
In most cases, you shouldn’t get a life insurance policy for the purpose of having living benefits. While living benefits are a nice add-on to a life insurance policy, you’ll be better protected against disease or injury if you get a life insurance policy and a separate disability policy.