Life insurance policies with living benefits allow you to access money from your policy while you’re still alive, in certain scenarios. Both term life insurance and permanent life insurance policies can have living benefits.
What are life insurance living benefits?
Life insurance living benefits are features of your policy that allow you to withdraw money while you’re alive — as opposed to the death benefit, which your beneficiaries can only access when you die.
What are the different types of living benefits riders?
Living benefits often come in the form of riders, which are policy add-ons you can buy to customize your base policy. Living benefits riders can usually be added to term life and permanent life insurance policies, but the options available to you depend on your insurer.
Some living benefits riders may be included automatically in your life insurance policy at no additional cost. For example:
The accelerated death benefit rider (also called a terminal illness rider) allows you to withdraw a portion of your death benefit if you’re diagnosed with a terminal illness.
Other examples of living benefits riders include the following.
A long-term care (LTC) rider can be used to take money from your death benefit to help pay for a nursing home, private nurse, or other costs associated with additional medical care as you age.
The chronic illness rider allows you to withdraw money from your policy if you’re diagnosed with a chronic illness and can’t perform at least two activities of daily living (ADLs) on your own.
A critical illness rider is similar to the above, but you qualify to withdraw money if you’re diagnosed with a sudden illness that comes with high medical costs and shortened life expectancy, such as heart attack, kidney failure, life-threatening cancer, or stroke.
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 with that in mind.
Learn more about how to understand your life insurance policy
What are the living benefits of permanent life insurance?
Although you can usually add living benefits riders to permanent life insurance, the cash value account is a main benefit of permanent life policies.
Your cash value account is separate from your death benefit and it accumulates over time as you pay premiums.
Your cash value growth depends on the type of policy you have — for instance, whole life insurance policies usually have cash value accounts that grow at a fixed rate set by the insurance company.
Once your cash value has accumulated enough, you can use it for several different purposes, including the following.
Paid up additions. You can buy paid-up additions with your cash value, which basically add more coverage to your existing policy.
Policy loans. You can also borrow against your account using the cash value as collateral. The loans can be used for any purpose — but if you die before paying it back, the outstanding balance will be detracted from the death benefit.
Premium payments. Some types of permanent policies — like universal life insurance — allow you to use your cash value to pay your premiums.
Policy surrender. You can technically give up your policy in exchange for your cash value. However, you’ll lose insurance protection and you might have to pay taxes and fees, so you should consult a professional before choosing this option.
Learn more about cash value life insurance
How much does life insurance with living benefits cost?
A 30-year-old who doesn’t smoke could pay between $23 and $30 per month for a $500,000, 20-year term life policy with a terminal illness rider. However, the cost for a life insurance policy with living benefits depends on your personal profile and policy choices. Your premiums will vary based on your age, health, lifestyle, type of policy, and the riders you want to include.
The best way to get an accurate idea of how much your policy will cost is to connect with a licensed agent. At Policygenius, our experts are licensed in 50 states and can help you compare quotes and policy options.
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The bottom line
End-of-life care is costly, but living benefits can provide some financial relief in a critical scenario. If you know you need to buy life insurance anyway, you may want to add a living benefits rider, especially if you have a family history of certain health conditions or people in your family have needed long-term care.
Depending on your age, health, and financial situation, it may make more sense to buy a standalone long-term care insurance policy, or a disability insurance policy. You can work with an insurance agent to learn more about your policy choices.
Frequently asked questions
Which type of life insurance provides living benefits?
You can add living benefits riders to both term life and permanent life insurance. Permanent life insurance policies also come with a cash value account, which you can access while you’re alive. The specific riders and policy options available to you depend on your insurer.
Do you need life insurance with living benefits?
It depends on your insurance needs and your financial situation. In most cases, you shouldn’t get a life insurance policy primarily 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.
