You know what a life insurance policy's death benefit is -- the money your loved ones receive when you die. However, your life insurance policy also includes something called a living benefit. This means simply that you can tap into the death benefit, if you are chronically or terminally ill, as certified by a physician.
What is a Living Benefit?
Living Benefits are also called Accelerated Benefit Riders. They provide the option of receiving a partial or full accelerated life insurance benefit if the insured experiences a qualifying medical condition, such as being chronically or terminally ill. They provide funds when they are needed to help at a critical time and help protect the money your client has saved for retirement and other life needs.
Partial acceleration is paid from a portion of the policy's death benefit. If 25% of the death benefit is accelerated, then the remaining 75% of the death benefit would remain, which could be accessed later or paid to the beneficiary upon death.
Full acceleration is paid from the policy's death benefit. In this case, the policy will be terminated after acceleration is paid.
Protection with No Additional Premium
The riders are offered at no additional premium and are generally included in every term or permanent life insurance policy.
Accelerated Benefit Rider Covers These Illnesses
Terminal Illness provides for the payment of an accelerated benefit if an eligible insured has an illness or chronic condition that is expected to result in death within a certain time frame specified by the insurance company. The most common time frames are 12 months and 24 months.
Critical Illness provides for the payment of an accelerated benefit if an eligible insured is unable to perform two out of the six activities of daily living (eating, bathing, getting dressed, toileting, transferring, and continence) or experiences severe cognitive impairment.
What Can a Living Benefit Mean to a Family?
To an individual or family facing the trials of a terminal or critical illness, a living benefit can mean the freedom to make choices, provide for a family, and peace of mind.
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Written by Bill Pepe