Living Benefits for Life Insurance

Generally Life Insurance is thought of as a benefit for loved ones on the event of the policy holder’s death or loss of income.  Now there’s another choice – Term Life that also features living benefits that can be used while the policy holder is still alive. 

Living Benefits

Three living benefit riders included with the policy at no additional premium include:

• Critical Illness
• Chronic Illness
• Terminal Illness

How do these benefits work?

These three benefits are Accelerated Benefit Riders, meaning you have the option to accelerate, or take a portion of your death benefit early, in the event of a serious illness.  Here’s how these benefits work:

• You have the choice to accelerate up to 95% of your death benefit
• Your current health condition and life expectancy determine the actual amount you can receive, which will be less than your accelerated amount
• You have the ability to accept the offer or maintain your initial death benefit
• If you accept the benefit offer, your premium is reduced proportionally based on your new lower death benefit

Critical Illness Benefit

The Critical Illness Rider gives you the option to accelerate a portion of your death benefit if you are diagnosed with a heart attack, stroke, cancer, renal failure, major organ transplant, or ALS.

Chronic Illness Benefit

The Chronic Illness Rider gives you the option to accelerate a portion of your death benefit if you are certified by a Physician as being unable to perform at least two ADLs or activities of daily living (bathing, continence, dressing, eating, toileting, transferring) or if you require substantial supervision due to severe cognitive impairment. 

Terminal Illness Benefit

The Terminal Illness Rider gives you the option to accelerate a portion of your death benefit if you are diagnosed as terminally ill with a life expectancy of one year or less. 

Examples of the benefits

Critical Illness Benefit

At age 40 Randi purchased Term Life with 30-year duration and a $250,000 death benefit.  Randi is diagnosed with breast cancer at age 62.  Randi chooses to exercise her critical illness rider and receive a portion of her death benefit early.  She plans to use the money to help the family cover her medical expenses and make up for her husband’s lost income while he cares for her.

1. Base Policy Death Benefit = $250,000
2. Randi accelerates 95% of her death benefit or $237,500
3. Her actually benefit amount will be based on the severity of her illness and its impact on her future life expectancy.  Given her condition, Randi receives a benefit of $143,238.
4. Randi can use the benefit for any purpose.
5. Her remaining death benefit is now $12,500.  Her future premium will be reduces based on her new lower death benefit.

Chronic Illness Benefit

Joe purchased Term Life at age 60 with a 20-year duration and a $200,000 death benefit.  Ten years later at age 70, Joe is suffering from complications related to COPD that have left him unable to perform two ADLs.  Joe decides to exercise his chronic illness rider to help pay for his care assistance.

Two years later, Joe’s condition has not improved and he decides to exercise his rider a second time to pay for his extensive medical costs.

Joe passes away one year later.  His beneficiaries will receive his remaining death benefit which will help them pay for his final expenses.

1. Base Policy Death Benefit = $200,00
2. First Election: 50% of death benefit or $100,000.  His actual benefit amount will be based on the severity of his illness and its impact on his future life expectancy.  In Joe’s case, he receives a lump-sum benefit of $82,030 which can be used however Joe wishes.
3. Second Election: Joe accelerates 90% if his remaining death benefit or $90,000.  He receives a lump-sum of $73,469 based in his current life expectancy.
4. Joe dies at age 73.  His remaining death benefit of $10,000 is paid to his beneficiaries.

Terminal Illness Benefit

At age 50 Howard purchases Term Life with a $150,000 death benefit and 20-year duration.  When Howard is 65, his doctor informs him that he has less than 12 months to live.  Howard exercises his terminal illness rider and plans to use the money to take his children and grandchildren on a family vacation while he is still able to do so.  He passes away 9 months later.

1. Base Policy Death Benefit = $150,000
2. Howard accelerates 95% of his death benefit or $142,500.  He receives a benefit of $134,434 which he can use for any type of expense.
3. His remaining death benefit of $7,500 is paid to his beneficiaries upon his death.  His premium is reduced proportionally.

For More Information…

At Dean & Draper we are always ready to answer your questions, provide additional information, and help you make decisions about your insurance. 

Dean & Draper is a Trusted Choice insurance agency representing over 200 insurance companies. For over 35 years we have offered a trusted freedom of choice to our clients.  ContactUs.