One of the biggest reasons for consumers to purchase life insurance is so that they are able to leave behind some financial security for their beneficiaries after they have passed away. However, sometimes traditional life insurance does not cover all of the financial burdens, especially while the policyholder is living. Here, we’ll discuss Life Insurance with Living Benefits in 2020.
Fortunately, there is a solution! Living benefits that can be added onto a term life insurance policy allow for the policyholder to access their financial relief in times of a chronic, long term, or catastrophic illness. What exactly are “living benefits”? In this article, we will discuss what they are and how they will help you.
What is Life Insurance with Living Benefits?
As most consumers know, life insurance includes a death benefit. This benefit provides a monetary payment to your beneficiary upon your death, tax-free. Pretty straightforward, wouldn’t you say?
What you may not be aware of is that life insurance is a pretty competitive industry, especially when it comes to term life insurance. Term life insurance is viewed as a commodity, or simply a product. If you maintain a good weight for your height, have zero health complications, do not smoke tobacco, applying for life insurance without speaking with an agent should be relatively simple.
In fact, you might just get the cheapest policy available. Or, you can also apply online and opt to be contacted if more information is needed for your application.
Due to the commoditization of term life insurance, many providers are positioning themselves into “niches”. For example, one provider might become known as the “go-to” carrier for those applicants with Type II Diabetes, while another provider might be known for its quick and easy underwriting process.
Then there are the providers that are known for offering “living benefits” rather than just the plain old traditional policy with death benefits only.
Currently, many life insurance companies offer living benefits either written within the policy or added on as a rider. It’s important that you have a full understanding of what is included with these living benefits when comparing them with other policies.
What are Living Benefits and How will they Help Me?
Life is full of unplanned, disruptive, and unfortunate circumstances, and living benefits can assist with some of these disturbances.
The term “living benefits” means death benefits can be used before death. There are three common circumstances where the policyholder is able to use the death benefit prior to actual death:
Chronic Care settings/situations
Critical illnesses - heart attacks and cancer
In any of these cases, wouldn’t it be more comforting knowing that you are able to access your funds to help you through treatment and recovery? Of course, it would be! This is exactly what living benefits do. With living benefits you are able to use these funds for whatever you need, such as for child care, paying your mortgage, or paying outstanding medical bills.
Interested in where these funds come from? The death benefit of course! However, it’s important to note that this advancement in funds does reduce your life insurance death benefit.
Each life insurance provider evaluates your circumstances differently, looking at the severity of your condition and making you an offer that’s in agreement with the terms and conditions of your policy.
This death benefit advancement is also tax-free. Keep in mind that you don’t ever have to take your carrier’s offer and you can keep your life insurance death benefit intact.
Should I get Term Life Insurance with Living Benefits or Cash-Value Insurance?
Great question, however, the answer to it depends on the insured, or you in this case. If you’re looking to secure a substantial amount of life insurance at an affordable price, your best option will most likely be term life insurance.
However, if you would prefer permanent life insurance with the opportunity to build a cash value asset that you could access in emergencies (mentioned previously), then Universal Life insurance will be the better option. Term life insurance is temporary.
What are the Pros and Cons of Life Insurance with Living Benefits?
All life insurance policies present pros and cons which are generally related to the applicant’s need for life insurance rather than the product itself. Your life insurance needs, especially the type of life insurance you purchase, should be directly related to the risk you are intending to mitigate and not the cost of the insurance.
Typically, any insurance product, whether term life insurance or permanent life insurance with a cash value component is going to be advantageous in some circumstances but not too much in others.
Companies that offer the Best Life Insurance with Living Benefits
It’s so advantageous for insurance shoppers to have many highly-rated insurance companies to choose from, no matter what type of life insurance you’re searching for.
The more companies we have participating in the market, the stiffer the competition, and the lower the rates. It’s good old economics doing what’s best for hard-working America.
Although we represent many life insurance companies that offer Life Insurance with Living Benefits, some just package it better than others. Here are our top three and the reasons for it:
|Product Name||FLX Living Benefit||Signature Term||Your Term|
|Non Medical Maximum Issue Amount and|
|Non-Med up to|
300k age 60,
Underwriting up to
$1MM Age 65 Up
To Standard Rate
18 to 55: $400,000
56 to 80: $150,000
|Underwriting Turnaround||Approval in 48 hours||2-4 weeks but can be sooner||48 hour Approval|
|Number of benefit triggers||18||16||10|
|Maximum Living Benefit Payable||Up to 90% of the Death Benefit||Up to 100% of the Death Benefit||Up to 95% Depending on Medical Issue|
|Definition for Terminal Illness||Life Expectancy of|
12 months or less
|Life Expectancy of|
24 months or less
|Life Expectancy of|
12 months or less
CEO - Licensed Agent
In my 20+ years as an independent life and disability insurance broker, I have personally assisted thousands of clients with their life and disability insurance needs. Being independent, I represent many highly-rated insurance companies and, because I am not beholden to any one insurance company, my focus is to find the right company and policy for each individual client. I believe that when people shop for insurance (or anything else, for that matter) on the Internet, they are looking for a simple, non-intrusive, non-pressure method of doing so. I strive to treat my prospective clients with the utmost respect and I believe an educated prospect can make the right decision without sales pressure. Please feel free to contact me at your convenience.