Introducing Living Benefits
Life insurance is much more then what you may think it is. You no longer have to die to get benefits.
Life Insurance that provides you money while you are alive if you suffer a:
Critical Illness such as a heart attack, stroke, become diagnosed with cancer, MS, Parkenson’s, renal failure…up to 16 different illnesses.
Long Term Care services at home, in assisted living, in a nursing home. Available if you can not perform two of the following activities of daily living without support: Bathing, Transferring, Eating, Toileting, continence, dressing or have a cognitive impairment such as Alzheimer’s or Dementia.
Terminal Diagnosis You are diagnosed with a condition that will likely cause your death within 6-24 months.
You can make a request for money from your life insurance while you are alive if you suffer a critical illness, terminal condition, or need long term care services. The money comes from the face value (death benefit) of your life insurance and is TAX FREE.
How it works:
Suppose you suffer a heart attack at age 44. You’re going to survive, but have a rough recovery period. The life insurance company will obtain your medical records to determine the severity of the attack. If it is considered a moderate heart attack, they might offer you 35 percent to 40 percent of the death benefit. That could be $100,000 of a $250,000 policy. If it is considered severe, 50 to 65 percent might be available.
Take, for other examples, an insured who is stricken with breast cancer and needs chemotherapy, or another who is diagnosed with Parkinson’s disease, which, over time, will diminish her ability to work. How helpful would it be to those people if they could tap into the death benefits of their life insurance policies while they are alive to ease their financial burdens?
How much of the death benefit can the insured gain access to? There is no easy answer to this question. It depends upon the severity of the triggering event and a formula the carrier calculates, which takes into account past and future premiums, life expectancy of the insured, and the type of coverage held.
If it is considered a moderate impairment, they carrier might offer 35 percent to 40 percent of the death benefit. That could be $100,000 of a $250,000 policy. If it is considered severe, 50 to 65 percent might be available. Life expectancy is the key. The shorter the life expectancy, the more dollars available.
There are a couple of different plan designs if the client accepts the payment. Some carriers will terminate the policy if the client accepts the payment, while others will allow the death benefit to continue but at a reduced amount.
This could include a remaining death benefit that is lower than the original, minus the living benefit payment. The key point? In either design, the policy owner has the final say. If he does not accept the living benefit payment, the policy continues as normal. If he chooses to accept payment, he could terminate the remaining coverage or keep a reduced amount.
The allure of living benefits
Many consumers find living benefits highly desirable. They provide an answer to the question most of them have: “What’s in it for me?” Most people can relate to having a heart attack, cancer or another critical illness, or they have a family member or friend who has suffered from a critical illness or needed LTC services. In my office alone, we have recently been touched by family members who have suffered a stroke, another who is receiving treatment for breast cancer, and another has been diagnosed with Parkinson’s. Even a woman in her early 20s has been diagnosed with overrian cancer. Critical and Chronic illness touch us all and to have access to life insurance death benefits while still alive is highly appealing.
HOW MUCH COVERAGE?
The most important decision you need to make after choosing to purchase life insurance is to make sure you obtain the proper amount of coverage. A single person with no dependents may not have a need for a large amount of insurance, but now with living benefit riders such as critical illness, he/she might want to consider a $100,000 policy that could provide access to $40,000-$65,000 tax free if a critical illness strikes.
A young family might need 15 times annual income in life insurance.
A retiree might just need something to cover final expenses.
How much you need takes careful analysis and you should work with an insurance or financial advisor to determine the proper amount.
TERM INSURANCE OR PERMANENT?
Living benefits are available on both term or permanent insurance. Some term policies with living benefits are very competitive…often just a few dollars more then coverage that only pays upon death.
While the LTC/chronic illness rider might be available on a term policy, I would not suggest a client consider the term contract as a solid long-term-care insurance plan. A client could easily outlive a term contract and become eligible for an LTC claim after the term contract ends. If the client wants a LTC/chronic illness rider, I suggest that he buy a permanent life insurance policy.
I see little wrong with advocating a split policy concept. The client can obtain term coverage with living benefits during his income-earning, high-expense and-exposure years, and permanent coverage with living benefits when it is affordable to address the LTC needs he could have in in his 70s and 80s.
What should you do now?
Work with an insurance agent who can offer life insurance that includes all three living benefits….Terminal, LTC/Chronic Care and Critical Illness. Some agents are limited in their product offerings and although their company might be excellent, it may not have living benefits. Some companies offer the LTC/Chronic living benefit but not the critical illness. Decide what is important to you and find an insurance professional who can assist.
Don’t know one or your insurance advisor can not offer life insurance with living benefits? Click the big green button, enter in some basic information and we will get in touch with you to help you find a trained agent in your area or assist you ourselves. We will conduct ourselves professionally in helping you find the right answers to your living benefit needs.
Life Insurance that provides you money while you are alive. What a great living benefit.