Life Insurance with Living Benefits

Life insurance with living benefits has a death benefit that pays out in the event of the death of the insured, in the same way as a traditional life policy, but also can pay out a lump sum while the insured is alive in the event of a Critical or Chronic Illness. And the insured does not have to be terminally ill, for either of these illnesses, for the benefit to be paid. Instead, if the insured develops a condition that meets the requirements to be classified as a critical or chronic illness, the insured will receive the death benefit while they are alive as a lump sum payment. Any portion of the death benefit that is not paid out will be discounted both in monthly premium and in amount of coverage. And that remaining amount of coverage will be paid out to the beneficiary in the event of the insured’s death.

Critical Illnesses covered under the living benefit rider will vary from carrier to carrier but will usually include Heart Attack, Stroke, Invasive Cancer, Major Organ Failure, End Stage Renal Failure, Blindness Paralysis, or Diagnosis of ALS. Some will also include conditions such as Major Burns, Loss of Limbs, Dismemberment, Arterial Aneurysms, Central Nervous System Tumors, Major Multi-System Trauma, Severe Central Nervous System Disease (Parkinson’s Huntington’s, Multiple Sclerosis, Encephalitis with long term effects), and AIDs.

Chronic Illnesses will include any condition (disease, illness, or injury) that causes the insured to be unable to perform 2 out of the 6 activities of daily living for a period of at least 90 days or require constant supervision to protect themselves from threats to their health and safety due to severe cognitive impairment. The activities of daily living include bathing, continence, dressing, eating, toileting, and transferring. Both Term and Whole Life can come with Living Benefits feature, but not all carriers offer it.

Now, it’s important to keep in mind that this type of policy is generally close in price to traditional life insurance, so it can be worth the few extra cents or dollars per month to ensure peace of mind in the event of a critical or chronic illness. Also, do not confuse this living benefit feature with the “terminal illness rider” which only pays out in the event you are diagnosed with a condition that is expected to result in the death of the insured in 12 months or less.