What are Life Insurance Living Benefits?
Life insurance living benefits are policy features that provide financial protection while you’re still living. These benefits can be accessed if you become ill or need an extra source of income. There are two main types of living benefits in life insurance: policy riders and cash value life insurance.
Policy Riders
A life insurance rider is an add-on to your policy that provides additional protection. Some common types of living benefits riders include:
- Accelerated Death Benefit Rider: Pays out some or all of a policy’s death benefit if you’re diagnosed with a serious illness.
- Long-term Care Rider: Pays part of your policy’s death benefit if you require long-term care.
- Return-of-Premium Rider: Refunds some or all of your term life insurance premium payments if you outlive your policy term.
- Waiver of Premium Rider: Allows you to suspend life insurance premium payments while keeping the policy in force if you become disabled.
Cash Value Life Insurance
Permanent life insurance policies have a built-in savings component called cash value that grows over time. You can usually take a loan or withdraw from the policy’s cash value. Some people use their policy’s cash value to supplement their retirement income.
How to Get Life Insurance with Living Benefits
It’s essential to consider whether you need life insurance with living benefits while shopping for a policy. You typically can’t add riders to an existing policy. Make sure you read your contract thoroughly to understand what’s included and how the riders work.
Cost of Life Insurance with Living Benefits
The cost of life insurance with living benefits can vary widely. Some insurers automatically include some living benefit riders, while others can increase premiums by as much as 25%. Permanent life insurance policies that build cash value are substantially more expensive than term life policies with a similar death benefit.
Frequently Asked Questions
What are living benefits for life insurance?
Living benefits for life insurance are policy features available while you’re still living, including living benefit riders and cash value in permanent life insurance.
Which types of life insurance have living benefits?
Both term life insurance and permanent life insurance can offer living benefits, but only permanent life insurance has cash value living benefits.
Do you need life insurance with living benefits?
Consider the level of financial security you’re seeking. If you want flexibility to use part of your death benefit in case of a catastrophic illness, life insurance with living benefits may be worth the additional cost.
