How would you like your life insurance policy to do more than simply pay money to your family when you die? Living Benefits of life insurance can help you while you are still living, especially if you are diagnosed with a covered medical condition. Let’s find out exactly what are Living Benefits of Life Insurance, and how do they work?
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What are Living Benefits of Life Insurance?
Before we dig in to the types of Living Benefits, there are a few things to keep in mind as we go.
- First, many insurance companies offer living benefits, but not all. So, make sure to ask if the policy your getting includes them.
- Second, there are 3 main types of living benefits, Terminal Illness, Critical Illness, and Chronic Illness. We will cover these in more detail in a moment.
- Third, the benefits received will be deducted from your total coverage amount for your policy. For example, if you have $200,000 policy and you receive $50,000 through one of the Living Benefits, the remaining balance to be paid to your family when you die will be $150,000.
- Four, you can file a claim for the Living Benefits multiple times.
Types of Living Benefits
Terminal Illness
Have you ever known someone who was diagnosed with a terminal medical condition? Cancer, for example, is a common one in which a person’s life expectancy could be shortened greatly. A Terminal Illness Living Benefit will give you a portion of your total insurance amount in advance if you are diagnosed with a medical condition giving you less than 12 to 24 months to live. Now, all companies set their own qualifications which is why I say 12 to 24 months. The amount of the advance varies too, an is usually between 75% and 95% of your total coverage amount.
Why is this a big deal? Imagine getting your money early and paying any debits, bills, or costs now without having to leave the worry to your family when you die. You may also choose to seek experimental medical treatment in which your health insurance will not pay for, so this benefit could provide the money that could potentially offer a cure or at least prolong your life. You could also choose to use the funds toward home health care, or a nursing home. Finally, do you have a bucket list trip you would like to take with your family? Yes, this money could provide that for you too. Oh, and by the way, if you live past the diagnosis, you don’t have to pay the money back to the insurance company.
Critical Illness
What if you have a major medical diagnosis, but your situation is not considered terminal? The Critical Illness Living Benefit can be claimed if you are diagnosed with a specified illness. Some of the illnesses covered under this benefit include heart attack, stroke, cancer, kidney failure, organ transplant, ALS, renal failure, paralysis, brain injury, and more. These are the common ones, though some companies cover even more medical conditions.
How does it work? The way most companies pay a Critical Illness claim is by severity of the diagnosis. For example, something that would be considered minor would give you access to less of your full coverage amount in advance than something more severe. Each company sets their own guidelines for this, and it will be detailed in your policy once you are approved so you know what to expect.
Are you unsure if you have Living Benefits in your life insurance policy? We can help you to learn exactly what your policy covers.
Chronic Illness
This one is a little different than the last two in that it pays you a monthly check instead of an advance. A Chronic Illness is one in which you can not perform 2 of the 6 Activities of Daily Living (ADL) without assistance. These include bathing, continence, dressing, eating, toileting, and transferring. Your monthly check amount is determined by a percentage of your total coverage amount.
Other Considerations
A few other things you need to know about Living Benefits of Life Insurance:
- You do not have to claim the benefit if you determine it is not necessary at the time.
- You can choose to claim less than the amount the insurance company is willing to give you.
- Some companies will decrease your premiums to reflect the remainder of your total coverage amount once you have claimed a portion of the money through a Living Benefit.
Examples
I tend to be a huge advocate for Living Benefits because I have seen the difference they can make for someone who needed them.
A few years ago, a lady who bought a policy with me was diagnosed with a Critical Illness. She filed a claim on her policy, and the company gave her $266,000. I took a picture of the check before I delivered it to her, and I have kept it in my presentation folder ever since. I sometimes show it when I explain this type of coverage. I am happy to say this client alive today. The check was able to help her with loss of wages, medical bills, and more while she recovered.
A couple days ago I helped someone put a policy in place that included Living Benefits , and I want to share what the benefits amounts are that are written right from the policy. Keep in mind the client got a $251,000 life insurance policy.
Terminal Illness will pay a check of $215,000.
Critical Illness pay out ranges in 4 classes from “minor” to most “severe.” $11,000 was the lowest and the highest is $203,000.
Chronic Illness benefit pays $1,900 a month.
I hope this has helped you understand some of the basics of Living Benefits. Having a policy that includes Living Benefits that pay a portion of your coverage in advance with a major medical diagnosis, can make all the difference in bridging the gap for your family should you miss work, incur added medical bills, or any other need. If you have any questions or if you would like to schedule a review of your current policies, I am here to help.
Mark Womack
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