What are Living Benefits?

The Unusual Living Benefits of Life Insurance

There is no question that life insurance provides peace of mind to millions of families who might have to face the unthinkable. The devastating loss of a loved one is a traumatic experience, but it is the financial loss of the breadwinner that raises legitimate concerns about paying for funeral expenses and taking care of the family during this time of grief.

A rising concern for families is the medical expenses associated with cancer, heart attacks, stroke, and other serious conditions and illnesses that can quickly drain the family budget. These unexpected costs that leaves the family member alive, but in desperate financial turmoil is where the living benefits of life insurance come into play.

These are cash payments that come from your life insurance in case of a serious illness or medical condition. There are usually qualifiers in the life insurance policy which means that you can use the cash if the medical condition meets the standards which are set in the language of the life insurance. However, most serious medical issues will qualify under living benefits.

The benefits in the policy are then used by you to pay for your medical bills or cover other necessary financial needs during this time in your life.

Why You need Living Benefits?

When you look at the statistics to see just how many Americans are struck with a critical or even terminal illness, it is staggering. When you consider that both the direct and indirect cost of having a heart attack may come close to $1 million, the need for financial protection is enormous if your health insurance is not adequate.

In addition to heart attacks, strokes, and cancer which will affect one-third of all women and one-half of all men in their lifetimes, there are the critical illnesses and chronic conditions that make doing everyday activities impossible. Bathing or getting dressed on your own becomes impossible and the care needed is becoming more expensive every day.

Health insurance alone may be enough to cover your medical bills, but it’s not enough to pay for the other necessary expenses that your employment use to cover. In fact, the leading cause of bankruptcy in the US is families who are unable to pay for their expenses due to the expenses racked up by critical medical care and the impact it causes financially.

It’s little wonder that that living benefits have become a popular feature in life insurance policies, providing cash when it is needed most for unexpected illnesses and chronic or critical medical conditions. Having living benefits as part of a life insurance policy offers a hedge against having to access retirement funds, CDs, and other investments that the family will need later.

How Living Benefits Work

While there is no typical situation, there are general examples that may help you to understand how living benefits will work for you in case the unexpected should occur.

John is 45 years old, married, and with two kids. Five years earlier, he has chosen a life insurance policy with living benefits that provides $200,000 in benefit amounts. He is struck with a serious heart attack that qualifies him to access the living benefits of his policy to pay the medical expenses that he is incurring. To do this, he chooses to advance 90% of his policy for use in paying his bills.

The life insurance company determines that John’s life expectancy is for another ten years and decides to allocate $115,000 in benefits for use in paying medical bills and cover expenses as his income is now gone.

This is a typical example of how living benefits works. Had John acquired his life insurance policy earlier or put in more benefits, it is likely he would have received a bigger sum to cover his expenses. It should be noted that there is still $20,000 in the policy which can be used to pay the beneficiary if he should pass away.

Another example of how living benefits works is for someone may not suffer from a specific illness or injury, but instead cannot perform some of the basic living activities such as getting dressed or bathing. A person who has $300,000 in benefits at age 63 who wants to hire a nurse to help with these activities may also access their life insurance policy.

This is common because many health insurance plans do not provide coverage for in-home care or hiring a nurse to help with daily activities. In this case, the person is expected to live for only a few years longer and accesses 24% of their total policy. This provides nearly $60,000 from the policy to pay for in-home care for the first year. They can access another portion of their policy for the next year and so on until they pass away or have fully used up the benefits.

How Can the Money Be Used?

Although the examples cited are for in-home care and paying the bills, you can use the money for whatever needs you deem necessary. The funds are paid directly to the policy owner and not the beneficiary, so you can use them to pay for medical expenses, bills, or whatever else you want as it is your money to spend.

You can talk to your insurance agent or file a request to get a quote for the amount you are qualified to receive under the living benefits rules. A determination will be made and a quote for payout will be provided for you. From there, you can decide what is the best course of action to take. Remember, getting a quote does not affect your life insurance yet, so if you choose not to access your living benefits, the policy will remain whole.

Your quote will cover the minimum and maximum amount you can draw for your needs. This will give you the flexibility to choose what is right for you and leave a portion behind for the beneficiary if you desire. In this manner, your life insurance policy can help you now thanks to living benefits which will cover your expenses during this time of need.

Where can you get these living benefits of life insurance?

Get in contact with an agent or company experienced in life insurance with living benefits.

We hope you found this article useful and that it can be of benefit to you or someone you know.

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